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The Library is only allowed to make a copy of published materials to "replace a work in their collections that is damaged, deteriorating, lost or stolen or whose format has become obsolete." What a nice regulation! They aren't allowed to make a backup until damage occurs! Whoever wrote these rules knows nothing about data protection and archiving.
Even if the Library did have permission to backup published works, they would still not be able to do so with DRM protected content, thanks to the lovely DMCA (Digital Millenium Copyright Act). The DMCA made it illegal to circumvent any type of copy protection (DRM) in the United States. There are no exemptions for Libraries or educational institutions. With all of these restrictions in place, the Library could easily lose some irreplaceable content. If you'd like to read the full Library of Congress report, it can be found here.
In 100 years historians will shake their heads at the short-sightedness of the early 21st century.
DRM seems to cause more trouble for those that legitimately pay for the software then it stops those from stealing it. At the rate that DRM is going who knows what fabulous works will be lost in the ether 100 years from now due to the DMCA and DRM in general.
Hopefully, the move by Apple/iTunes to provide DRM-Free music (and later Amazon) is a step in the right direction that could shift the industry but I'm not very optimistic about it.
Actually, the article is partly wrong. The DMCA now has been changed to allow circumvention of copy protection on items that are no longer on the market. For instance, it is now legal to circumvent copy-protection on the first Xbox, because it is no longer on the market.
DMCA exceptions can be argued for every 3 years, but they also must be resupported by the arguing/supporting party for approval for renewal every 3 years.
I see the exception you are referring to:
"Computer programs and video games distributed in formats that have become obsolete and that require the original media or hardware as a condition of access, when circumvention is accomplished for the purpose of preservation or archival reproduction of published digital works by a library or archive. A format shall be considered obsolete if the machine or system necessary to render perceptible a work stored in that format is no longer manufactured or is no longer reasonably available in the commercial marketplace."
Notice that this exemption is only valid if the original Xbox game requires the original hardware. If the Xbox game in question is playable/supported on the Xbox 360, then it is still illegal to circumvent the copy protection on the disc.
"...when circumvention is accomplished for the purpose of preservation or archival reproduction of published digital works by a library or archive"
If this is the exact wording then it still does not apply to Joe Schmoe Consumer. If it did, I would think it would be more explicitly stated.
Yep, that is the exact wording of the exception and it might apply to Joe Schmoe if he is doing it for the purpose of "preservation".
The morons in congress approved content control in the first place and now they don't like it 
Way to go, retards!
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