I just spent a bunch of time trying to resolve ‘codec hell’ and actually get Windows Media Center to play actual video files. Here are a couple of solutions if you are having similar problems ;-)

1. Buy actual software to decode mpeg2 …
Microsoft buypacks

2. Download Videolan
Get videolan !!

Does Microsoft Really Support MPEG2 ??

Well, not really. Read their page about Media Center supported formats and go ‘hey, shouldn’t there be something about mpeg2/divx ?’ … I guess at least it’s possible. Note that Media Center uses its own proprietary format for encoding timeshifted TV, so it’s ‘unlikely’ to be able to be played on other machines, e.g. across a lan, without being transcoded and copied first.

Luckily the Videolan software ‘just works’, though I haven’t used it much yet, it hasn’t refused to play anything yet.