i recently bought a wdtv HD so that i could play my 1080p mkv video files [mostly DTS audio] and i bought a seagate 1T free agent to store the videos.
i was dissapointed with the video quality of the wdtv .

i decided to use my xbox as a media player .
i figured out i had to convert my external hdd to a HFS+ in order to store large files and have the xbox360 recognize it

im looking for a one step way to convert my mkv files and not lose any video quality.

im not even sure if what im doing is correct , post info help

Try iSharesoft MKV Converter to convert your original file to H.264/AVC for playback on your xbox360, that is a easy way can play your files without losing any quality.

I do use mine as a DVD player, but not particularly often.They did break the DVD player code a few builds back. You might try getting an older t3ch build, around June or so, I know it was working back then. I wish they'd stabilize again, they've been unstable only for quite a while now.

Hey, If you are wanting MKV/HD playback but have to convert/transcode beforehand. Here is how i watch MKV's on my XBOX 360 without Transcoding/Converting the MKV's.

By installing the following 2 apps/software you can play MKV's WITHOUT transcoding/converting. Stream from Win 7 Pc/Laptop ~ XBOX 360 with 5.1

http://shark007.net/ ~ Shark007 codec pack for windows 7 [Remove/uninstall all other codec packs beofre installing Shark007 codec pack] After install choose Shark007 SUGGESTED settings.

http://www.divx.com/en/software/divx-plus ~ DIVX Package. When installing you only want to install the *DivX Plus Tech Preview*
nothing else is needed.

After all apps/codecs are installed, Connect to windows media center via XBOX 360 go to your libary (updated) and you know will be able to slect MKV playback.

Any questions or assistance please PM me.

Peace

You can do this two ways that i know of,

easiest to stream from your pc with MCE "windows 7" and leave the untouched mkv

Or convert them all to wmv-HD..i use Xilisoft Video Converter Ultimate but it takes like 6hr to convert a mkv. even with a quad core and 8gigs.

Takes me 35mins to convert 60 mins of mkv on my quad core with VideoEncoder which is free. http://videoencoder.codeplex.com/

However, you need to have Microsoft Expression Encoder installed. It keeps 5.1 intact.