Here are the ways to protect your kids form chatting with potential predators while they are playing X-Box Live.
Xbox LIVE Family Settings
Family Settings perform two functions on the Xbox 360 console. When playing offline, they can be set to grant or restrict access to games based on the ESRB rating. When playing online, they can be used to restrict access to content and contacts based on the parent's choice.
With Xbox LIVE Family Settings, you can set different levels of protection for online gameplay, online communications, and downloading member content or items from Xbox LIVE Marketplace.