From experience I know a failed drive won't be covered by the extended 3-year warranty, and only the original 1-year warranty.
It is something that should be noted, also they'll charge you to replace the drive (I forgot how much I paid, I want to say $60-80.)
However, with the extension of the RRoD warranty, you can always towel trick a failing unit and take advantage of that.
Chances are you'll get an Opus board if you sent in a Xenon.
I can't wait for the Valhalas to launch - will it be the final end solution for RRoD? I hope so!
EDIT: And only Microsoft published games are covered for damage caused by a faulty drive. I had my Viva Pinata get chewed up when my original Premium was failing, but $5 + S&H and they replaced the disc.
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