It does work, I do it all the time with my Droid 1. I personally use PDAnet but im sure Easy Tether would work just as well. I hook my Droid up to the PC using the USB cable and log on using PDAnet and have Internet Connection Sharing is enabled. I have my Xbox connected to the PC using a ethernet cable and it works. I would like to try out WIFI tethering but I dont have a WIFI adapter for my Xbox and Im not rooted so.
Now I got to tell you I live in a rural area so the towers I connect to dont get much use so im not sure how it will work for you. I play MW2 and it will lag a little here and there but its playable. I generally get three green bars while playing and it will sometimes get down to two yellow bars.
And a little FYI, you cant do updates using 3G. So what I do is whenever there is a update I need to play a game or anything like that I have to take my Xbox to my BIL's house and get the updates, he has cable.
And another FYI when you are setting this all up and you try to do a "Test Connection" on your Xbox it will probably come back saying something about the MTU. Just back out of the screen where you run "Test Connection" and go all the way to your dashboard and try to log in under your user name and it works for me but it will always fail the Test Connection part when I try.
And to anyone that hinks it cant be done, go on You Tube. There is a video of a guy doing this on a bridge with his laptop, flat screen tv and Xbox all running off a portable power supply and there are also videos of people doin this while driving down the highway and playing Xbox live while riding in a car!