this looks quite promising, actually. the fact is that data is being sent to and from the 360 and it's RAM (at least, maybe even HDD, too) through [probably] unencrypted ethernet/WiFi. if we could sneak extra data in and cause an overflow or something of that sort, a hack may be possible. of course, I'm no real technical guy when it comes to this, and I'm thinking way ahead, but it could be feasible. for now, I'm stuck trying to get MCE to run on VirtualPC for my PowerBook
DivX/Xvid is very possible, just look for the app and make the profile, just like Rhindle said.
I smell homebrew dashboards and media centers just around the corner...