Which DVD drive do you have?  You will find the installation diagram below the each drive.

The NME-360 v2.0 will auto detect which media is inserted - original game or Backup - Full Auto.
(Power on Xbox 360 by "Eject" to ensure chip is OFF - only required for BenQ)

Xbox 360 BenQ DVD Drive Board - POWER (5V) and EARTH (GND)

Xbox 360 - Philips BenQ DVD Drive Front Panel (LED Display) ARM / DISARM CHIP

NME-360 V2.0 ONLINE GAMING INFORMATION:

You can install either Y Point ( only wire in the one that you connect online with - eg connect Y USB if you use the Official 360 Wireless USB Adaptor.

You can install both Y Points ( this way if ever you change the method you connect online it will Auto-detect )

You can leave Y both disconnected - alot of gamers obtain games with certain Stealth Patches that are not detectable online. ( these Stealth Patches may breach copyright agreements )

Xbox 360 Console Main Board - DVD Drive (Network Disable) Optional

Xbox 360 Console Main Board - DVD Drive (Network Disable - Alternate)

Xbox 360 Console Front Panel - DVD Drive (LED Display) Optional

Xbox 360 Main Board - DVD Drive (USB Disable - Alternate / Optional)