Back in October 2008 I had the unfortunate happen and my Hotmail account was hacked. Whoever the evil person be, they decided to also hack my Gamertag as well completely locking me out of it. I of course contacted Xbox Live, who sent me to Hotmail, who Sent me to Microsoft, who eventually tried to give me my account back but ultimately failed. So I jumped through the hoops Xbox Live told me to jump and had the Gamertag cancelled and expunged.
Fast forward to today. I review my bank statement for a FHA Loan and I notice I have two recurring fees from Xbox Live. What is this I ask? Well I contacted Xbox Live support. Lo and behold my original Gamertag was never cancelled and has been charging me ever since. In addition to that Xbox refuses to refund any charge past 30 days past it posting. Thus, they refuse to refund me. My bank only allows fraud charges up to 120 days so it only covers the last charge. I got screwed out of $400 because of Microsofts' inept employees.
Moral of the story. If you're planing on ending your subscription or killing your Tag make damn well sure its dead.