I had many problems with it too but then I downloaded a different viersion and haven't had an issue since.
Here's the flawless version I've been using:
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Make sure to double click on Partition 3.
For the Avatar Hack:
1.Get MODIO:
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2.Open XPlorer 360
3.Go To Partition 3> Content>0000000000000000>FFFE07DF
4.There should be two folders; Open the 1 with file called AvatarData
5.Drag the "AvatarData" file to your desktop
6.Open MODIO
7.On the toolbar go to Tools>Utilities>Avatar Unlocker
8.Press Load File
9.Select your "AvatarData" file
10.Press "Unlock Everything"
11.In Xplorer RightClick the "AvatarData" on your XB360 HD (not the 1 on your desktop)
12.Select Delete (Select yes if prompted)
13.Drag the "AvatarData" file from your desktop in to the folder in Xplorer
14.Unplug 360 from Internet
15.Reattach HD to 360
16.Start up 360
17. Go to avatar editor
18.Change clothes to something new (anything with a star next to it)
19.Save and exit
20.Reconnect to XBL