It is not about piracy at all (For Gawd's sake, they have a CD ripper built into the 360 and the XBOX), it is about MS not wanting their 360 to become a media centre.
They absolutely don't want the 360 to become an all singing and dancing media centre unless they are forced to by Sony.
Why?
Because they lose money on the hardware - if the 360 becomes a wildly popular media centre and tons of people buy it for that functionality and don't buy any games then MS just loses a ton of money.
Also because they have a media centre product they want you to use (and that they actually *make* money on "Windows Media Center".
If they made a profit on the 360 itself, then they would make that sucker the media centre from Hell you can bet on it, and they would be touting it as the best thing ever. As it is, they don't want it to be that.
Our only real hope is that Sony try to push the PS3 as a super duper media centre, which would force MS to open it up to compete.
As for playback of divx etc. you can do that now with the 3rd party wrapper software, I play DIVX, HD WMV, Xvid, MPEG2, .TS HD files etc. right now streamed from the WMC PC through the 360 to my projector.
Obviously I would prefer to be able to put a 750GB drive in my 360 and play the files directly from there.