I spoke with a Level 3 D-Link Product Specialist yesterday about this problem. He told me that D-Link is aware of it and solving it and getting out a new firmware update is a very high priority. He said that D-Link just got the DVR-MS white paper from Microsoft. As you may know, Microsoft is very famous for not releasing information about their code and file formats in order to keep other companies from writing competing programs.
The gentleman suggested that I monitor this forum for news.
Like you, one of the reasons I bought the DSM-520 was its support of the DVR-MS file format.
In the meantime, while you wait for the firmware update, I suggest that you go to www.afterdawn.com and search on DVR-MS. There are many tips on converting the DVR-MS files to AVI and MPEG so you can watch on your TV what you record on your PC. Another good site for DVR-MS conversion information is www.videohelp.com with the same search for DVR-MS.
Here is another tip. When you record your DVR-MS files, and temporarily (I hope) when you convert them, store them in folders by TV show name. It will make it easier to find them on the DSM-520. The DSM-520 only shows folders that have files in them that it can play.
One of the benefits of the DVR-MS file format is that it can stream the video while it is recording. In other words, if you cannot start watching a program until 20 minutes after it has begun, but you are recording it, you can watch it from the beginning while Media Center is still recording it, just like a stand-alone DVR. I hope that D-Link will implement the DVR-MS on the DSM-520 in such a way that will support this.
Lastly, I had to go through several calls to Level 1 technicians, who knew enough to give me to a Level 2 technician, and Level 2 technicians who did not know anything about the DVR-MS issue. I finally was sent to a Level 3 Product Specialist in the US who knew immediately what I was talking about and what was going on. I had to suffer through 5 hours over 2 days of being on hold, being dropped from the queue, and calling back. The people in India (it is against D-Link policy for them to tell customers what country they are in but their accents said India) are definitely out of the loop on anything beyond the most basic issues.
I will check this forum and the list of firmware updates daily.