This is entirely an "I wish" sort of thing, but there are a few games that I think could be perfect examples of what xbox live arcade games should be.

The first and foremost is Gunbound:

This game is a perfect online game, it's also calm and turn based so those trash talkers have plenty of time. It has a "cash" system that could easily be converted to MS points and turn a profit. The controls are a simple remapping, and nothing too complicated, A fires, analog stick aims/moves, LB and RB switch weapons, and d-pad uses items. It's also just an addictive game that would most likely be a success. With possible item, map, item and mobile updates you have a great variety of possible DLC.

Second would have to be Toejam & Earl:

The Genesis classic that made co-op has so much to gain from live and hard drive space. First of all, Toejam & Earl is 100 levels high, with high chance of falling down a few levels over and over and over. It's riddled with secrets and retarded shit those stoners on xbox live can enjoy, and with the present system and random mode you have lots of possible DLC. Toejam & Earl 3 may have sucked so amazingly that you may look at this suggestion with disgust, but those who have played it know it's a great idea. It's designed for co-op and that's apparently all the rage these days with games.

Third is Bust A Move 4akaPuzzle Bobble 4:

Superior to puzzle fighter, make it HD and add characters for massive victory.

And last is any Mega Man X (1-6):

For logic's sake I was going to say X6, because X1-3 was for SNES and should be virtual console releases, but since X4-6 was for the PS1 and nobody dares speak of a megaman x beyond that point. So I figure it doesn't matter which iteration they choose. That and Capcom does what Microsoft tells it (Dead Rising 2?).The Megaman X series has that same fanatical completionist sort of gameplay with secrets and alternate costumes and whatnot that those kids these days don't have the patience to search out and would use old gamefaq pages to solve anyway. I would see this game similar to Castlevania: Symphony of The Night in the way it would be presented a an immaculate gold encrusted nugget of glory : "This game is badass. Enjoy our benevolence and infinite wisdom that has come to bless you with this game, and pay us for it." Plus Megaman only gets worse as they make more, so the only logical way to make money now is to re-release.

There's more, but I don't want to rant forever on only "I wish"-es and "what if"-s.