The 360 supports avi files natively either off a dvd or if you like, from a usb hard disk or memory stick, or streamed from media centre or a streaminfg server such as tversity. It does not support mkv files and some high bit rate avi's, but also supports HD WMV with 5.1DD etc which is nice. If you have a HD plasma or lcd then I would say the 360 is worth while for that, but if not, then I wouldnt think you would notice a lot of difference except in the processing power the 360 has over the old xbox.
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