Yes, you do need to pay in order to play online. A year's subscription to Live is about fifty bucks. Less than five bucks a months. You'll also need a headset which will run you like fifteen bucks. Thats all I know of you'd need to get thats not already included in the elite bundle.
There are XBL subscription specific cards you can buy in stores. MS Point cards cannot be used for your XBL subscription as far as I know. Some are. There is a list of backwards compatible games on xbox.com.
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