I've experienced the RROD once my XBox was no longer in warranty. I ended up getting another XBox, bowing to pressure from the younger users in the family.
The solution to the RROD problem, IMO, is to get a PS3 system. Better graphics, minimal lag during action-heavy sequences, and also plays Blu-Ray discs. The repair techs that I've spoken to noted that the build quality of the PS3 is much superior to the XBox 360s, but, take this for what it's worth. I have both the 360 and the PS3, and would buy another Sony product before shelling out the cash for the Microsoft one. The new Kinect system for Xbox may be a deciding factor for some, YMMV.