Just to clear it up: there are not dual layer cd's. There are only dual layer dvd's
Also just wanted to say, if you don't want to spend money on a chip or are scared of your soldering ability, you can perform a softmod with a gamesave exploit. Check out some of the really good guides over on xbox-scene.com There are installer packages that do everything for you. All you have to do is a get a gamesave onto the hard drive. If you have an AR for xbox, then you are already set.
As for backing up games, yes you must read them from ftp over you network to your pc, then use a program like Quix to build an iso to burn. About the network port; you won't be able to use it to ftp your game over until you have modded your box (softmod or chip).