Did you buy an xbox that is jtag-able? A very small portion of them are.
Lobbies have 2 ways to prestige you.
1. Kill someone you get enough XP to prestige
2. Hit a button combination and it gives you the amount of XP needed to prestige.
After either one you have to back out and prestige.
As for banning, possible, but unlikely.
Challenges you get it all. Camo's, attachments, emblems, titles, etc. The only emblem you will not fully unlock is the Rotating Skull.