XMedia Recode is completely free and can convert ahead of time almost anything to a format playable on Xbox 360 without the need to transcode in real-time.
1. Download and install recode
http://www.xmedia-recode.de/en/download.html
2. Open the file you want to convert
3.In the Format tab, select “Microsoft” in profiles, and “XBox 360 H.264″ underneath
4.In the Filters/Preview tab, make sure to select the right resolution for your TV, and the right audio track
5.Click the “+ Add Job” button in the top tool bar
6.Click the “Encode” button and you should end-up with a .mp4 playable by your Xbox 360
