It says it works, but I've never actually been able to get it to. If I choose the "play DVD" option the drive reads for 10-15 seconds, then the screen goes black and the Xbox locks up. If I view the files and try to play a VOB file on the disc, it plays, but only for 5-10 seconds and the video is a mess. However, if I rip the disc to the HD or use the Microsoft player or DVD-X, everything works fine.
The videos look great in 1080i, but you need at least 30 minutes or prep time before any movie.