last I checked you cannot buy a copy of XP MCE,
only comes preloaded on machines.
And as of right now MCE is the only way to stream video.
Also the only way (as of now) to put videos on the xbox 360 is via
xbox live market place, sadly that only gives you trailers...
MCE is just Windows XP with the media center application more or less,
so don't worry about your pc being compatable.
as for compatable video/audio:
Video formats
* MPEG-1 with MPEG audio
* MPEG-2 with MPEG audio or AC-3 audio
* WMV 7, 8, & 9 with WMA Standard or WMA Pro audio
* WMV Image 1 & 2 (Photo Story 1, 2, & 3)
Audio formats
* Windows Media Audio (WMA) Standard
* WMA Pro
* WMA Lossless
* MP3
* Other formats for which a DirectShow decoder is installed and registered on the PC
source for that info is
here