
If you are searching for a better way to edit, convert, encode wmv8 movies for MXM, take a serious look at Sonic Foundry Vegas Video 4. A professional video editing program that encompassess the MXM preview movie process from start to finish.
My sources for movies were IGN and my Xbox (using DV Cam analog to digital pass thru). For IGN quicktime movies, simply import to Vegas. You can then edit them to your heart's desire. For movies that IGN couldn't offer, I captured with my DV Cam and imported straight into Vegas. Again, easily editable since in native DV format.
Once you have a nice edit, simply tell Vegas to encode to WMV8. I had the best results using clips of 30 seconds or less. I encoded them at 768kbps at 320x240 resolution. All movies came at or under 3 megabytes. All movies worked with MXM.
Hope this helps.
By the way, to add to the list, I've done MotoGP, NHL 2003, TOCA, Soul Calibur 2, Sims, State of Emergency and a few others I forgot.