I loaded up the Windows 7 RC and tried playing an XviD .avi on my 750 as an extender - it played, but it was clearly being transcoded: pauses at regular intervals, 100% CPU load on the computer, and a noticeable loss of detail and increase in blocking artefacts.
A google search informed me that other people have had this problem with .avi's and X-Box 360s in Windows 7 as well - but that it didn't happen with older builds of 7 (including the 7000 beta). Is anyone else here having this experience with the Release Candidate? This is so disgustingly unnacceptable it's not funny...