Gollum,
This is all about one thing. Microsoft is in bed with Hollywood, and they are sucking up to them to get even more Hollywood business. The entertainment industry hates the existence of open and DRM-free codecs, and Microsoft is appeasing them. That's why MCE doesn't officially support XviD/DivX, why the extenders don't support it at all, and is also why HD-DVD and Blu-Ray won't even work with the most expensive flat-screen PC monitors that are being sold today (they are all being obsoleted by HDMI PC monitors that haven't hit the street yet).