(brief) HOWTO run MCE without reinstalling Windows
I've changed my setup since my first post about using MCE in VMware, (I'm now running Vista RC1, normal install, no vmware).
From what I remember, you install vmware workstation, and then tell it you want to create a Windows XP instance. I gave mine about 512MB ram, but more is better.
Then, go through the very long install of MCE.
Install VMWare tools in MCE (!! really helps).
Ignore the Windows error message when starting Media Center that the VMWare video card isn't good enough, its fine for this purpose (backend serving).
Then establish connection between MCE and xbox 360 by going to 'Media Center' on the 360. The first time it will ask you a couple of questions, and gives you a code to type into PC (the password it will use to access the PC I think).
On the PC side, download the windows media connect kit from the link the 360 will show you. Run it, and it will ask for the 360's code/password. After that you should be able to go straight into Media Center on the 360, and it will contact your pc.
Once done, configure Window Media Connect on the PC to share your folders to the xbox 360. You might have to add the shared folders to your 'My Videos' folder onscreen on the 360, using (X) on xpad or INFO(?) on remote (dont have).
This will allow you to stream music and videos from your pc.
For the linuxers out there, this would probably work for someone running VMware on a linux xbox too.
Transcode 360 will work inside the MCE instance, but how well will depend on your pc (ram, cpu, etc). On my 3ghz celly w/1gb, it worked pretty well with streaming dvd iso's, but I dont like the way Transcode 360 would convert a very usable dvd mpg into a wmv, instead of just repacking the dvd's transport stream into a regular mpeg on the fly. I think tsconvert has taken this approach, but not on the fly, must do full convert first.
p.