I am using Transcode Beta 3 currently to run DiVx and XviD files on xbox 360 using MCE 2005. It is well your worthwhile to do this and setup MCE 2005 elsewhere instead of your living room.

To run .ts file (HDTV Streaming file), you need to install HDTVpump.
You can download HDTVpump from http://www.dvbportal.de/projects/hdtvpump/
You need to install this on the MCE 2005 for it to stream to xbox 360 via MCE 2005 Extender.

You get DD5.1 and HDTV output on your screen or panel via xbox 360 and it ROCKS!

xbox 360 upscales normal DVD movies to 480p only if not mistaken and MCE 2005 does the same upscales the DVD movies to 480p as well.

If you want a better upscaler use your ole xbox and install the current xbmc. You can upscale to 720p / 1080i. Tried and tested.

Instructions to connect xbox 360 to MCE 2005.
http://www.microsoft.com/windowsxp/mediace...p/ssviewer.mspx

Extended file is located here
http://www.xbox.com/zh-SG/pcsetup/alldownloads.htm