I've been using my 360 to do just that. However, a re-encode of a bluray or hddvd disk to a dvd9 wmvhd is about 48 hours though I bought 2x1TB external drives, one of which is a Lacie nas with Ethernet and usb. I've got this hooked up to the network via Ethernet and then the other external drive hooked up to the Lacie via usb (really neat feature of the Lacie drive). The only "problem" I had with this is the 360 does not support NTFS file system, so I formated the drives to fat32 with partition magic to get around the windows-fat32 formatting bottleneck, only to discover that files on a fat32 system are limited to 4gb in size, how lame. Luckily the 360 also supports hfs+ filesystem, so thats what I am using now with the program "MacDrive" to interface with windows. This is working out quite well so far. Now I'm just waiting for Microsoft to add divx/xvid support on dec 4th in the dashboard fall update.