I found a solution that is working for me! I see people trying to be helpful with answering this question but it is not about banned account or IP address issues, I see several people discussing this same problem on the forums.
I could not log in all of a sudden and kept getting the scary notice. I was not banned, account fine according to live support, could log in from other computers, etc. Turned off firewall, used different MAC address/network card, used completely different IP address/connection. Have latest video drivers, etc. Just all of a sudden could not log in from the machine...
Then I realized something HAD changed - a Windows 7 update had occurred between the time I logged off and then could not log back on, having it set to automatic. So I did a system restore to a point before the update (and turned off auto update). Then immediately I was able to log on no problem!
Now I don't know what the issue is technically, it did not seem to be a firewall issue. Again, it was not a hardware ban or IP address issue. I know Windows 7 is a little grey area as far as SL, but something about the last update seemed to be why I was unable to log in - maybe a security update was blocking it somehow?