So here's the basics of how it works.
Media files can simplistically described as a container that contains multiple media streams. An MP4 container may contain an h264 video stream and an AAC audio stream.
In W7 Media Center, the container is parsed on the PC (ie the PC is responsible for breaking out the individual streams). Those streams are then sent to the extender individually, if the extender device supports those stream types. If the extender does not support the stream (example, DTS audio on the XBox), the PC will transcode just that stream to something that is understood. I've only validated this on the XBox, can't get it to work on my Linksys DMA-2200 nor have I confirmed that it's supposed to work on anything but the Xbox.
If the method above fails, the PC will attempt to send the entire file (container and streams) to the extender for completely local playback.
If that method fails, the PC will transcode the entire file (assuming you have the correct codecs on the PC) and stream that out to the extender (I've verified this method on the XBox and the Linksys DMA-2200).
What I think you should take away from this:
- Container formats become irrelevent in W7 / XBox extender combo
- Codec support is still limited to what the 360 can do natively
- Transcoding gets you the rest, but with poor quality
I expect that so long as they remain in business, the popcornhour will probably still deliver better codec support. The XBox extender will deliver arguably better UI, especially when you include the high-quality free plugins. The XBox extender will also do a nice job with Live TV and PVR functions.
That's what's in my crystal ball anyways. I'll likely post a more detailed blog entry on this in the future. Right now there's a bug in the MKV parsing for me that messes up the video playback on the 360. Other containers are working very well though.
Based on the wikipedia article, AVCHD is an h264 video stream and ac3 audio stream in an m2ts container. I have tested that combo on my XBox (although not from your camera) and it was able to play back. I seem to recall some issues with the timeline bar, with that file size, but I'll retest that for you when I get a chance.