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Will all network streaming be done through the Media Center Extender?
No, the Xbox360 will have network streaming capabilities auxiliary to the Media Center Extender that will allow it to stream from non MCE Windows XP machines. This will be done through "Windows Media Connect" built in to Windows XP (or available for free through windows update).
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5.1 Which file types does Windows Media Connect support?
Windows Media Connect can stream the following file types to your devices:
Audio
Windows Media Audio (.wma)
Advanced Systems Format (.asf)
MP3 (.mp3)
WAV (.wav)
Video
Windows Media Video (.wmv)
MS Recorded TV Show (.dvr-ms)
Audio Video Interleaved (.avi)
MPEG-1 (.mpeg, .mpg)
MPEG-2 (.mp2, .mpeg, .mpg)
Picture
Bitmap (.bmp)
Graphics Interchange Format (.gif)
Joint Photographic Experts Group (.jpeg, .jpg)
Portable Network Graphics (.png)
Tagged Image File Format (.tif, .tiff)
Playlists
Windows Media Playlist (.wpl)
MP3 Playlist (.m3u)
Notes Although Windows Media Connect can stream a variety of file types to your device, your device might not be capable of playing every file type that Windows Media Connect supports. For information about what file types your device supports, see the documentation that came with your device.
Some Windows Media files are protected to prevent unauthorized distribution and playback. For example, the files that you download from online music stores, such as MSN Music and Napster, are usually protected. Not all devices can play protected files. To find out whether your device supports playback of protected files, in Windows Media Connect, click Devices, and then review the information displayed for each device.