In testing out 'Xbox Media Center' as of yesterday, which is an open source project for the original Xbox but requires a mod to operate... The software is disturbingly well made and elegent. It's like an Apple product, only not limited to only supporting Apple crap! :O
It can set sizing boundaries for video playback so overscan doesn't cut off subs. It can navigate your local network and play video directly off LAN machines or network attached storage. Play stuff off burned DVDs. It can even parse sites like apple.com's trailer section or even youtube, display their thumb nail and synopsis in it's own gui, not even needing a true web browser and play them full screen like any other media.
It honestly leaves you wondering why Microsoft didn't find these guys and make it a retail Microsoft product. IT's that well freakin' made. Except that XBMC means access to the Xbox's hard drive from outside computers, which means easy modification, even easier than the task currently is.
Only downside is libavcodec/FFMpeg for h.264 and a 733mhz Celeron processor... Yeah, the h.264 playback is a bit lackluster, certian complicated scenes drop frames like a mofo.