Via Xbox-Scene.Com

"E66 Explained: DVD model/version Check - E71 Issue Fixed? *Updated*
>> Well we got a bit more details, courtesy Commodore4eva, about the Error 66 some users with modified DVD firmwares got after the Fall 2006 Xbox360 Update.

It looks like Microsoft has implemented 'DVD DEVICE' and 'DVD VERSION' control in the new kernel, a bit similar to the Windows XP/VISTA device upgrade check!
Apparently Microsoft stores the original stock factory drive/version somewhere on the 360, and with the new Fall06 kernel it will give the user an E66 if it detects a drive model or firmware version change.
Update1: it's possible that the hardware info has been stored on the 360 at a later time, like during a previous update, rather than stored from the beginning/factory.
Update2: Apparently MS has been storing drive info on consoles manufactured starting around end of May/begin of June 2006. Consoles made before that date will probably work with any drive model/version. Updated all news below with this new info.

What this means for Toshiba-Samsung TS-H943 drives (in consoles made after ~ end may 2006) is that if the drive was originally loaded with the MS25 firmware (often referred to as an 'MS25 drive') it should work fine with C4E Xtreme v3.3 (based on MS25), but not with C4E Xtreme v4.2 (based on MS28) as that's a version change. On a drive originally loaded with the MS28 firmware (often referred to as an 'MS28 drive') anything below C4E Xtreme v4.0 will not work as v3.3 and below are based on MS25.

It's unclear what Microsoft really tried to achieve here. Maybe they tried to lock out users with modified Toshiba-Samsung TS-H943 MS28 drives. When MS wrote the fall update, C4E Xtreme v4.0+ (which is based on firmware MS28) was probably not released yet and C4E Xtreme v3.3 and lower would be no option for these users as those are based on MS25 ... which is a version change and would thus result in E66.

Hitachi-LG GDR-3120L drives not affected? Well, modified firmwares for the Hitachi-LG don't reflash the whole firmware. Instead they patch small parts of your onboard DVD firmware which will obviously not change the version. Model and version don't changed, so you get no E66.
Exception here could probably be if you use a full flash replacement firmware modchip or if you manually removed the flashchip and flashed it with a different firmware version. I have no real data on this (few people do that), let us know if you fall into this category.

Replacement drives? That's something else we should talk about as it's now probably no longer possible to swap from a Hitachi-LG GDR-3120L to Toshiba-Samsung TS-H943 (or the other way around) as the model of your drive would no longer match the model stored on your 360.
Also, the FW version on your replacement drive should not be different than your stock/factory drive. I suggest you get a drive with the same version as your stock/factory drive if you ever need a replacement drive. Quick note for the new people here: if you ever plan to replace your drive yourself, keep in mind you also have to patch/flash it with your unique DVD drive key - the key-check is of course still there
I wonder if Microsoft did change the DVD model/version info stored on all repaired/refurbished Xbox360s when they swapped a DVD-drive or motherboard ... Let us know if this happened to you

I also have an update about the 'new/refurbished/replaced Xbox360 Error 71 issue' I talked about earlier today (which is totally unrelated to E66 or DVD firmware issues). According to Major Nelson Microsoft released the 'fix' to the Fall 2006 update:
Now ... Microsoft does not want to tell what they fixed exactly. But as E66 is probably on purpose and not a 'problem' for MS, and Major Nelson mentions new/refurbished consoles I'm gonna assume they fixed the E71 issue. Sadly if you already tried to update your brand new system before and got an E71, it looks like you're up for a(nother) swap/repair even before you could play your console for a second.

Send it to Tot31. He knew the stuffs.