This is the method used, When you have no xbox live or an xbox live updates fails
Copy to a USB flash drive
If you cannot connect your Xbox 360 console to the Internet, you can copy the console update from your computer to a USB flash drive and then install it on the console.
Note The USB flash drive must use the FAT32 file system.
- Plug your USB flash drive into a USB port on your computer.
- Download the update file.
- Click Save to save the console update .zip file on your computer.
- Unzip the file. If you are using Windows XP, Windows Vista, or Windows 7, double-click the .zip file to unzip it.
- Copy the contents of the .zip file to the root directory of your flash drive.
- Unplug the USB flash drive from your computer.
- Plug the flash drive into a USB port on your Xbox 360 console.
- Restart the console.
- When the console restarts, the installation program starts automatically. Select Yes when you are prompted to update the new console software.