I live in the United States, and I would like to play XBOX Live with a friend in India. Is this possible, or are there divisions among servers that host different regional players?
So you wouldn't think this, but apparently the Xbox Live region for the US does not extend to Canada. They have their own region up there. A region I can only imagine is filled with Hockey and Maple Syrup. It's like they're a different country.
I spent some time abroad (where Canada is now defined as abroad for the previously mentioned reasons) and I learned a couple things about Xbox Live:
That last one seems most relevant to you question. Not only have I played with friends in Canada (both there and in America), but also friends in England and Germany. Now I've never tried India, but I'd bet you dollars to samosa, you can.
Although, watch out for that points thing... its really annoying.
I live in the US and have played against someone who lived in Hong Kong before. (I think I've also played against people who live in Europe ... did a couple of multiplayer games and wasn't entirely sure who was there.)
That doesn't specifically answer your question, but it leads me to believe that you should be able to play against your friend on Xbox Live.