It's refreshing to see the consumers winning out in the console wars - with stiff competition being the only reason Sony or Microsoft would even consider supporting "pirate's choice" codecs.Update: A reader has tipped us to the fact that placing the videos in a folder called "VIDEO" on the USB drive makes them appear in the Video menu without using "Display All".The CAT1 engine can handle everything that is thrown at it now, including all of the Discovery titles, the burn-at-home discs that the ULead and other tools create, and a particularly interesting forthcoming title I can't name, but should be called "CAT1 Torture Test Disc".For Advanced Content titles (aka CAT2) the player is now the most spec-compliant player available, and has had some areas re-written for performance and specification-compatibility.Plus we had to make sure the Matrix Trilogy played perfectly of course! The original versions used DRC (dynamic range compression) on Dolby sources but this could produce muddy sound on occasion: the DRC defaults to off now, with a notable improvement in some titles.
This has worked for several of my files, but there are a number for which this does not work.
Videos can be played from a USB device, although accessing them is relatively unintuitive - if you simply navigate to a USB device from the Video menu, the menu will say "There are no titles." Instead, you need to select the USB device, hit Triangle instead of X, and select "Display All" from the menu.
Then you will see the video files (and everything else) and can either play the file or copy it to your PS3.
While the menu quirks leave room for improvement, Sony's implementation of the codecs sure beats the hell out of transcoding - even if you already have software set up to do it automatically.
Even the hardcore types with an Xbox 360 and PS3 might find themselves leaning towards using the PS3 for their media playback - there's no question it's a quieter, longer-lasting system, and the easily user-upgradable hard drive means you can archive a huge amount of content on the system - while Xbox 360 users are stuck paying out the nose for Microsoft's proprietary 120GB hard drives.