When I first started out with MCE streaming to the XBox360 I used to try all sorts of codecs. It was also painful to get .mkv's to stream with ease.
No more. All you need is MCE (preferrable Windows 7 over Vista) and DivX Plus (www.divx.com) and you can pretty much throw anything at your XBox. I am streaming .mkv's with this setup with no problems now. DivX Plus even extracts thumbnails from the videos for display in your video folder. Slick!!
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