If you've got a fast enough computer, you can try the
TVersity Media Server. It does some basic transcoding and works well with audio, although it takes a bit to cache the video before it starts playing. The only downside is that you can't fast forward or seek in the file.
Another solution is having Windows Media Center Edition, since I've heard that can stream stuff to the XBox 360 extremely well, and with the right plugin can even transcode MKV to a 360-friendly format.
I used the TVersity method with video for awhile, but eventually I just got an S-video and audio-out cable and just hooked my laptop up tho the TV. Now I just use TVersity for audio streaming. Gotta save that hard drive space on the Premium console.
Jam it back in, in the dark.
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Taco