You can send them into Microsoft for any major problem I think. The problem is just that it may take as much as 2 months for you to get it back. That is a hell of a long time to go without your gaming system. I had a 360 also and it crapped out on me too. Mine didn't have the red lights, it just had this problem with this disc tray where it would not open or close alot of the time, and sometimes it would shut down for no reason. Overall, the system still functioned but it was a pain in the ass to use. I just decided to say "eff microsoft" and got a PS3. I have been extremely happy ever since.
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