Xbox 360 + Windows Media Connect = video streaming
Until now, the Xbox 360 software would allow reading pictures and music shared from a PC (running Windows Media Connect), but not video. For video streaming, you had to run Windows Media Center on the PC.
A recent update of the Xbox 360 now allows video streaming from Windows Media Connect or Windows Media Player 11, although for WMV files only. Luckily, VLC can convert most video formats (DivX, Xvid, etc.) to WMV.
Here are some tips:
First, verify that your 360 can access MP3s and pictures shared via Windows Media Connect. That's pretty easy, as long as your 360 and PC are on the same subnet.
Then, you can get some sample WMV HD files from the WMV HD Content Showcase, share them and stream then.
Finally, use VLC thru this convenient one-click conversion batch script to transcode videos to WMV format for streaming playback on the 360.
The re-encoding approach using VLC is not as smooth as an on-the-fly transcoding (which TVersity apparently now supports), since you have to wait until the conversion is complete before you can watch the video. On the other hand, it doesn't require a super powerful PC, provided that you are not in a rush.
Update (2007/12/06): A new version of the Xbox 360 dashboard was just released. The update includes support for DivX/Xvid codecs. Yay!