Instructions
Update XBox
Open "System Settings" from the XBox Dashboard.
Highlight "Test XBox LIVE Connection" and press "A" on your controller to start the test.
Select "Yes" if you are prompted to update your console software.
Add Friends
Sign in to XBox Live. Select "Friends" from the Dashboard.
Select the blank avatar from the list to add a new friend.
Enter the gamertag of the friend you want to add and select "Done" when you're finished.
Select "Send Request" when you're ready. You can alter the message you send to that friend. Repeat the process for each of the friends that you want to add to your buddy list.