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the yearly fee is well worth the $60 or so. the servers are very reliable and always on and fast. (which is where the money goes) in almost 6 years i have never had a problem with that.
my xbox has chewed up a few discs too. its a very common problem. about one in every 10 gets chewed up. microsoft with replace damaged disc.. but only if they published it.
as long as you dont disturb the xbox with a game in it, its usually fine. for instance if you accidentally bump into it while its running, good bye disc.
overall its very fun and worth the cash. as pricey as it is to start. i love the thing.
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