Microsoft has officially announced what will be in the December 4th ("Fall Update"). It's a huge list of updates, but what is most interesting (for this website anyway) is the support for DivX and XviD, or specifically, MPEG-4 Advanced Simple Profile.
AVI files (and .divx files) that have been encoded with MPEG-4 ASP (as used by DivX/XviD) will now be supported, along with AC3 5.1 channel audio. Resolutions up to 1280x720 (720p) at 5 Mbps will be supported. Advanced encoding features such as B-Frames, interlaced frames, Q-Pel, GMC and MPEG quantization will all be supported. The only thing not supported is DivX Ultra files (.divx files with menus).
So what does this mean for you and me? Well for us, our Xbox 360 DivX, XviD Playback Guide will have to be rewritten, or scrapped entirely, because it's no longer needed (apart from the instructions to use TVersity as your media streamer, as opposed to the clunky WMP). Ditto for the AVI to (Xbox 360 compatible) WMV Conversion Guide (although this guide serves as our main AVI to WMV guide, not necessarily for the Xbox 360). For you, this means you can now play almost all your DivX and XviD movies through the 360 without having to do anything complicated like video conversion or realtime transcoding.
PS3 owners should not fret, because they will get their own DivX support soon. Will they get it before December 4th? Probably not, but you can never rule anything out when the console war is concerned.
You can read the Xbox 360 Video Playback FAQ, which has been updated to include the DivX/XviD playback info.
You can discuss this news item in our forum here.
Update: The Fall Update is now available to download (if it doesn't show up for you when you start your Xbox 360, select to play a game, and the prompt should show up). DivX and XviD playback has been tested and it works very well indeed. The updated guides are now online.