Since then the TiVo/XBMC solution was retired in favour of Vista Media Center, which provides a simple solution for media to TV, including dual tuners, and playing divx and xvid etc. It also acts as a server to the very clever media center extenders, which provide the same functionality to other TVs around the house.
Recently I upgraded to Windows 7, which adds some functionality, but is altogether nicer and a more modern experience. Also includes xvid and divx out of the box. However, it doesn't support MKV files, and although a codec can be obtained I fought for several hours to get it to pass Dolby directly to the optical output.
I gave up, and decided to try the XBMC for windows download. Fantastic piece of software, runs straight out of the box, easy to add media folders, and plays everything! The people at microsoft could learn a bit from XBMC - the options to change to digital audio output and other simple changes are right on the screen. There is a slider to correct audio/video sync issues. There is also the option to automatically set the display to 50 or 60 Hz depending on the source. Very clever stuff. And simple. Pay attention Microsoft.