Microsoft certainly can. You have to accept their license agreement and possibly an NDA to develop on the Xbox platform. I don't think the exact terms are public knowledge. We can look at the XNA license/participation terms for some hints though:<p><i>"Microsoft reserves the right to take down a game retroactively without notice. Microsoft encourages peer reviewers to report objectionable content in a game."</i><p><i>"Peer reviewers will reject your game if:<p>-Your game contains prohibited content, which is content not allowed on Xbox LIVE services
-You misrepresent what is in the game play or in the promotional materials for the game. All games must have a trial mode that showcases the actual game experience. If you fail to do so, or use this method to provide your game for free, your game will be failed in the Peer Review process. Games are NOT available for free currently on the system. This system is NOT a video hosting service and should not be used as such.
-The promotional content for your game ( for example, the box art, description, banner or title) is not appropriate for all ages on Xbox LIVE Marketplace
-The game crashes, it has too many bugs, or it is technically defective in some way"</i>