You do need xbox live to play FFXI. However, you can just use a free silver account, like I do. Right now I pay $0 for Xbox live + $12.99 a month for FFXI. The only thing is I cant play any other of my xbox games on live (like I'd want to ).

I guess if you're made of money you could pay for both xbox live gold and playonline, although I dont really see the point.