I really want to play this with a friend but I am afraid of getting banned from GFWL which as far as I know, will also get my Microsoft account banned.

I highly doubt it. That game is super old and no one really batted an eye back in the days when it was popular. Just do it in a private room though.

Rockstar have never had problems, at least from what I recall, with people using LCPDFR on Multiplayer. It's more than likely because how different the Multiplayer is to Grand Theft Auto: Online. You should be fine with playing LCPDFR with your friends on multiplayer. 

I've never seen anyone banned in GTA IV multiplayer. I'd recommend sticking to private matches though; it is hacked beyond belief.