OK, apologies galeen - I posted a reply in the other thread but my connection is being crap again so it obviously didn't go through.
You need to enable the UPnP Server in Settings>Network>UPnP Settings and then add the video and music folders you want to the appropriate sections. Then when you're on the 360 just change the music/video source and it should autodetect XBMC.
I've not tried it for videos really, except for a 2 minute test - I much prefer the display in XBMC and since mine are next to each other. The music on the other hand works great, although navigating it can be a hassle, as it doesnt organise properly (I choose an artist, and still have access to all songs) but otherwise its great, and I stand by my comment that the right music can really help your gameplay.