Sorry I am not following you, my implementation is to supply people with encrypted firmware, they send it to the MCU and the MCU will decrypt the data and write it to flash memory.

If you can bypass encryption easily then you are one of the few geniuses and perhaps your work has been undocumented. As of 2004 there is been no officially successful attempts at breaking the xtea algorithim.

The xtea algorithim in xbox was never really borken, people exploited flaws in the hardware design to run unsigned code, most notably the big font flaw.