This issue really kills me, so i went through some forums after reading something about “pings“.
Considering that the issue is to connect to another friend’s game or chat, it is only logic that this is a network related problem.
According to the guys from TeamXlink.co.uk – see this thread – “All 360 games have a ping limit on them that won’t allow you to join the game if the host’s ping is over 30ms to you.” -”you can help your ping by closing all other apps that use the internet .. msn, aim, torrents etc ..”
If you, for instance, are only allowed to use 1 connection – 1 IP that is, you must indeed close all other apps. In fact, keep your computer offline while playing on the xbox live.
My ISP allows me to use 4 IP’s, which makes things easier. I also make sure that there isn’t any IP conflict between my devices.
So, the solution above is applicable to those gamers who are allowed to use 1 IP address, but if you are allowed to more than 1 and you still have the issue, try the fix anyway.
Hope this helps.