Picked up a WDTV last night for $200. As you may have guessed from some of my other posts, I’m into my A/V stuff, so this thing seemed like a bargain. Many reviews will rave about how great it is, and I must say it’s not too bad, but I have found there are bugs (even in the latest 1.0.1.2 firmware): Playback of any AC3 file seems to result in a barely noticable (but very annoying) 100ms or so audio lag.

While it’s not possible to play mkv files directly on the xbox360, you only need to do a few things to remux the video and audio streams into the mp4 format. This means that no re-encoding is done with the video, therefore there is no loss in video quality. At the time of writing, the xbox360 doesn’t support anything other than 2 channel AAC audio for mp4 streams, so you’ll have to put up with that.