What Causes the Red Ring of Death?
In one word...heat!
Soldering Process
One theory is that during the soldering of the processor chips, the mass of the chips themselves absorbs the heat that is needed for the solder to flow properly and leads to cold solder joints. The cold solder joints are weak and during the heating and cooling process of turning the console on and off, the weak solder joints break.
Insufficient Cooling
The other theory is that because of insufficient cooling, temperatures inside the console reach very high levels. This leads to excess stresses between the motherboard and the processor solder joints resulting in the general hardware failure known as RROD.
Solder Type
In addition to the above, it is generally understood that the specific lead free solder used is not as resilient as the older tin/lead solder. As mentioned above the high temperatures combined with the brittle solder lead to hairline cracks that some consider un-fixable.
GPU Location
Also it does not help that the GPU is located directly underneath the DVD. Room was needed for DVD so the heat-sink for the GPU was reduced in size. Smaller heatsink, less heat dissipation.
Overall Design
The console is small to begin with. It uses vents, heat-sinks and fans to help dissipate the heat. Any obstruction of the vents or fans can exacerbate the potential for overheating. The "Falcon" motherboards which use a smaller CPU are supposedly less prone to the "General Hardware Failure". In addition, there are reports that the "Elites" and "Premiums" have larger heat-sinks.
Possible Solutions
Repair Kits - All of the kits on this website attempt to re-flow the solder by overheating the console. In addition, they replace the thermal paste to help with the transfer of heat from the CPU/GPU to the heat-sinks. They also use screws to prevent the heat-sinks from loosing contact with the CPU/GPU. Some people supsect that the X-Clamps themselves loosen over time because of the expansion and contraction caused by the heating and cooling process.
External Cooling Unit - There are multiple manufacturers of external cooling units that can be attached directly to the Xbox 360 console. There have been reports that the use of some external cooling units can burn out the AC Power unit. Microsoft considers external cooling units an unlicensed add-on and will void the warranty of the console if there are any indications showing signs of usage.
Re-flowing the Solder - There are other techniques besides the X-Clamp overheating that attempt to re-flow the solder. One uses a heat gun and extra heavy duty tin-foil to try and protect the motherboard while blowing 700 degree air on the areas that are suspected of needing the fix. Another techniques uses a modified solder removing iron that again directs heated are at the suspected areas that need the solder re-flowed.
Conclusion
Heat is the problem. Whether it is the processors not getting adequately soldered, or the specific solder itself being brittle and susceptible to the heat build up, or the heat-sinks not being big enough to dissipate the heat, heat is the problem. Fixing the solder and making sure the heat dissipates is the answer.