I can understand why some people wouldn't trust Microsoft, but personally I trust them and dont have a problem with them storing my private info. They have a good privacy policy and if they screwed up even a little they'd be getting sued left and right so they have good incentive keep my private data private and not abuse it.

The thing is this isn't just a Microsoft issue, this issue is industry wide. Every computer game I've bought in the last six months phones home every time I start it up. When my Internet is down I have one or two games that refuse to even start because they cant connect to a validation server.