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it plays most divx and xvids fine off a dvd-r or streammed thru eother tv versity or transcode360. i prefer tv versity as it werks with everything i have, xboxs,x360, ps3 and wii
if your on about homebrew/tux then its possible but you need to get the cpu key which in turn means gutting your 360 performing a complicated timing attack to get the cpu key. and thats just the first step.
XBMC wont be on this any time soon the devs have pretty much said they are 100% focusing on the tux port
atm out of the 3 consoles the wii is the one that will prolly come out on top[ homebrew wise we may actually end up seeing a proper modchip for it. perhaps in a couple of years the ps3 might but the 360 prolly wont untill ms gets bored and is preping the next xbox
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