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Do the latest update and you'll find the 360 now plays divx natively no need to transcode anymore.
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Did the update, Divx files now play great from dash.
I seem to have a problem however accessing my media files from within the extender interface. All my media is stored on a Windows Home Server box. In the dash the files can be viewed and played no problem (they are shared on the WHS box). Using the MCE extender interface it can't find the files and asking it to add files does not give me the option to add files from the WHS PC only the MCE PC. Any ideas as to what I'm missing?