Yes thats exactly what community games is. You write a game, price it at 200, 400, 800 MS Points and then people can downlaod a trial (trials cut out after 8 minutes). However that game needs to be complete, not crash and follow proper xbox guidelines - thats what the review process checks.
Games in peer review and playtest cannot be accessed by everyone, only other creators club members. They don't get your source code or assets, though technically they could reverse engineer them from the compiled .ccgame file that you submit. There would be little point though becuase if they submitted it to the service as their own work you wuld fail it and report them for IP theft.
Community games costs $99 and anyone can submit a game as long as they get through peer review. There's little marketing done for you and you don't get achievements or leaderboards.
Arcade costs (at least according to the rumours) $10,000 for the xbox SDK, requires a publisher, requires you to go through a long certification process, requires you to go through multipel countries ratings boards (also expensive and long) and hardest of all its not open to everyone - you have to pitch your game and get chosen. In return you get lots of free marketing, exposure to a maket that only has a couple of releases a week, gamer pics and themes, achievements and leader boards.
All you seem to be confused about is the process... the thing you submit to the xbox needs to be complete - consumers will be paying for it. So it would be very unwise to put a game with placeholder graphics in for review. As logn as the game plays though it won't be failed. Quality is not determined by peer reviewers. Just crashes and anything else tht makes the game unplayabel such as not following xbox best practises or safe areas.. there's docs to follow. But if you put up a playable game with crap graphics people would advise you not to but it would likely pass. Of course consumers may not buy it and game blogs may mock it.
So becuase MS know people want to get feedback they added a playtest process. Its jsut the same as peer review but the reviewers dont pass or fail, they just play and give feedback.
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