Probably two years ago or more, I was in the middle of playing one of the Call of Duty games when my Xbox 360 turned off. Sad-face. Even sadder was the realization that I was one of the victims of the Xbox 360's red ring of death. Granted, it didn't seem like the same red ring of death I've heard of where the entire ring is red...just one quadrant was red for me. There was an error code displayed if I attempted to turn the Xbox 360 on. I found out from Microsoft that it would be $100 or so to repair it. It wasn't that important for me, so I decided against it and let it sit for a very long time.
More recently a friend told me about this ifixit.com website, where they have a repair guide and kit! I finally decided to get the kit and give the repair a go. The guide was very good and the repair went well. In all, I probably spent 3-4 hours but I was definitely taking my time. The "worst" part for me was cleaning the old thermal paste off of the heat sinks and CPU/GPU as it didn't really want to come off. I ended up using a razor blade along with rubbing alcohol and cotton balls. The re-flowing of the solder with the heat gun went fine, but there's no confirmation that you actually succeeded in doing anything until you put the whole thing together and try it out. I did goof the fan install the first time. I got the whole thing back together and plugged in and ready to go, turned it on and got a loud "chatter". After taking it all apart again (only taking about 5 minutes now) I found that the fan was hitting the motherboard :-p
Give it a go, what do you have to lose...the warranty? Ha! If that stuff they recommend works better for removing the thermal paste, I'd say it would be worth it. (The photo uploader doesn't seem to be working right...boo)