Running CNK via emulation on the 360 isn't perfect. Reviewers and players note:
The Xbox 360 reads a special area of the disc called the Security Sector. Original Xbox discs don’t have one. To run on a 360, the ISO must be rebuilt with a “dummy” or patched SS. verified download hot crash nitro kart xbox 360 iso
Using modified files or playing unverified backups on an internet-connected Xbox 360 can result in a permanent ban from the Xbox Network (formerly Xbox Live). Xbox 360 Backward Compatibility Requirements Running CNK via emulation on the 360 isn't perfect