a lot of great advice here already, definately follow the suggestions of NOT placing your card details on the console, keep it at vouchers only, set the age limit on the games (all can be found under the system settings) spend time with him playing but remember its for him and his mates, being a dad and a gamer I know how easy it is to "help" on certain parts and end up carrying on further to the dismay of my kids lol.
xbox also allow you to score the people you meet online, if they have poor comments their online game experience score gets affected, this ultimately affects who they get paired with in game lobbies, your game experience score improves for positive feedback from other players, meeting targets set by the system ie adding 5 friends (not sure if this is on there it is just an example)
the main problems mentioned of other users abusing people is mainly centered around Call of Duty and, from personal viewing and listening experience, fifa.........with fifa it's the drop in online lobbies that players dish out abuse, normally because they think they are good and end up losing to better players lol, COD the main problem, and I know thi swill cause a lot of reaction, is gobby players such as the Americans and a certain Welsh player by the name of Dai Ling Ping.......
another way of looking at it is get another xbox, for yourself, so you can join him online in the games, I do this with my son on PS3, I can keep an eye on the games he plays, his friends lists and the way he is speaking to other players and the way they speak to him. I find its a great way to bond with each other as it gives you both something to discuss.
I honestly think that it is fine to let a child online via xbox or PS3 as long as there are procedures in place set by the parents. If he gets online now then he will understand the benefits of keeping his account clean, if he doesn't then microsoft will suspend/ban his account with a small or permanent ban, if he got a permaban then he would need a new xbox and a new id as the account AND the console get banned.
good luck and happy gamimg