The MS WM9 codec is great, and I would say looks as good if not better than most broadcast HD. T2 is the only real movie in the format. There are tons of HD movies available on DVHS. The format is pretty much already dead but the JVC decks and the tapes are still for sale.
As far as WM9 HD on the Xbox, it's absolutely positively never going to happen. WM9 HD uses way too much CPU horsepower. You need a 3ghz PC. However, I'm not sure if MPEG-2 HD (transport streams) can even be played back on the Xbox. That is definately a possibility. Transport streams can be digitally captured from OTA and DVHS sources. For OTA, you need a decoder card, or a decoder STB w/ firewire output. Storing the TS files on DVD-/+R isn't practical, but using and Xbox's HD might be a fun thing to do. <