The drm license still needs to be properly assigned, even with the NXE.
Q: I can find the media download, but it either wont let me download it, I get an error, or I must be online in order to play back my DivX files. Whats the deal?
A: This is a known issue, with a fairly simple work around. Microsoft has bundled this codec with the previous optional codecs, so if you have downloaded it before, it can cause problems. The download is tied to your console as well as your gamertag. Simply download it from another account on the same console, this enables it to be used by any other profile on the same console. If you don't have another profile, just create a new silver account and attempt to play a DivX file while that new account is signed in. You will be prompted to install the update. Once this is done, you no longer need to be logged into LIVE to use the DivX playback. You may delete that silver profile if you want after the codec is installed. The new (as of July '08) DRM licence transfer tool may remove the need to be logged into live to playback xvids as well.