If you can't pause and rewind live TV then it does sound like the box / hard drive is faulty.
The 360 also needs a network connection to Virgins servers to be able to watch the recordings, if you can watch on-demand and use the apps that would prove the connection is OK.
You could also try a factory reset of the box using the keep recordings option first just in case they come back, one user said that worked, you could also try the format disk option.
If nothing works then you need to call Virgin on 150 from a Virgin phone, mobile or landline, or 0345 454 1111 from any other phone to report a fault, or wait here for one of the forum team to pick this up which might be 2 to 3 day's.
When phoning choose the option to report a fault, then ignore all the options offered and you should then be placed into a queue to speak to someone.
