Well this makes far more sense, as it turns out the two new codecs supported in the may 7th dashboard update are not DivX or XviD. I should have known better than to jump in and post news that didn’t make sense to me, but I guess I’m only human eh.
So the two new formats allow for 1080p video playback of supported marketplace content, and actually appear to be designed to compete with Apple TV which currently only supports 720p. So sorry to disappoint/mislead anyone who was hoping to play their collection of pirated movies backup DVD’s.
Thanks to crucible for pointing this one out.