so i could burn an xvid to cd-r/dvd-r or try to import it into my windows media player library and it will play/stream the file?

All my movies are in HD using mastroka (.mkv). Stupid bleeding-edge me...

@jcy: Yep, did it this morning when I woke up. Interestingly, after you download the dashboard update and try to stream videos, it makes you download an entirely separate mp4 codec.

Works fine, just odd that they didn't include it in the main package. Maybe they figure most people won't use divx, so why waste the bandwidth?

I'm sure that the 360 will play off a data DVD with .avi or .divx files. The interface has changed 360 users! Remember to hit the blue X button to change the source. I spend a good few minutes wondering why I couldn't access files on my PC until I saw that you have to "change source". Once I did so I found that playing DivX video from my PC working great.

Haven't had a chance to check out the other changes yet. I'm just thankful I don't have to have my PC transcode anymore.

yaaay no more transcode 360!

Yesss! Trying this right after work!

@jcy: Just a heads up. Divx files have to be encoded with DivX 5 or later.

All that fucking time and effort that I spent 2 months ago getting my XBMC box *JUST RIGHT* in time for top gear season has just gone down the shitter. Figures.

CONFIRMED: doesn't work with any of the xvid or divx movie files I have. I suppose a prior poster is correct, it MUST be DivX 5 or later. XviD support is a bust.

Tested it some more and it DOES work but NOT via the MCE extender function of the 360 (lame). You have to select video under the media tab and then press x to browse to other video sources. Select PC and you are good to go.

Important Tip:
If you want to watch your movies off an external hard-drive, MS claims you need it formatted as FAT32 because the 360 can't do NTFS. This is of course terrible because you can't have files over 4 gigs or hard-drives over 32 gigs.

The better solution is this: Make your external drive HFS, the mac drive format. That's right, the 360 can read mac formatted drives, but not Windows NTFS drives. It's all because of the ipod support. If you're on a mac, then this means you're set and happy. If you're on a PC, then it means you may need MacDrive for windows. Playing stuff off an external USB hard-drive removes all latency concerns and is really easy and nice.

So, does this mean that the Zune will get divx and xvid support too? Pretty stupid if it doesn't.