Looks like there are a lot of folk out there, cursing Microsoft's decision to only support WMV on the Xbox 360.

Those kind folk over at TweakTown have put together a nice little guide to hand hold you through the process:

Since the Xbox 360 is essentially a PC wrapped in Microsoft 360 dashboard software, I always thought there must be some way to play movies other thanWMV on the console – without actually hacking the 360 software and hence voiding your warranty. It turns out you can!

Full guide here.

Related: Watch DivX on your Xbox 360