I can't watch the video ("not available in your area"). Is this just some random guy who modded his drive firmware, or is this one of the people who involved in the scene, helping with the development of exploits or so? Perhaps even the "anonymous hacker" that first presented the KK exploit on a DEFCON a few years back?
If random guy, then the thing is this. The KK hack only works on certain older kernel versions, and consequently only on old hardware that supports said kernels. The KK hack is pretty useless in that regard, especially now that there are two other hacks (SMC, reset glitch) which are more universal in terms of hardware and kernel support.
If you reflash a drive firmware today, it's highly likely you're going to use it for piracy, since that's all a reflashed drive firmware is good for these days. Even with a new drive firmware, the kernel running on the CPU will check the cryptographic signature of any data before a memory segment may be marked executable. At this point the memory becomes read-only. The XBox360 has a strict policy that any given memory segment may not be writeable and executable at the same, which makes it difficult o exploit.
The KK hack (which again only worked during a very small window of time) used a number of lucky circumstances, first that shader data in this game was not cryptographically signed, which allowed arbitrary memory to be written. And secondly a bug in a hypervisor call, which allowed the whole security system to be disabled, once you had your own code running.
Now, I don't think flashing your drive firmware warrants police action, but let's be honest and call a spade, a spade regarding piracy.