UPDATE 12-03-2008:

Ok so I have another update.  Seemed as though the MPEG-2 didn't sync the audio perfect. It was off about .5 seconds.  Made it a bit weird to watch the movie.  So I tried the following last night. 

Straight DVD to AVI
AVI was set at 3000 bitrate with 128K audio
Import AVI into Windows Movie Maker and publish it as a WMV DVD Widescreen Quality (3.0Mbps -> 3000 bitrate)

Audio and picture were very nice.

Downside to this is I was back to using 2 programs instead of just one (which is what I wanted in the first place)

Total process, making the AVI and WMV, took about 1 1/2 hours for a 1 1/2 hour movie.  File size ended up being around 2 GB.  Still this method is faster than the free one below as it took and additional 60 minutes or so after the AVI files were done so you were looking anywhere between 3 - 4 hours to complete 1 movie.   

I'll keep positing updates so you know what methods I have tried and what you can avoid or use.  If I find a better way I will post an update.  Also please check out the link in Mike's comment below. Another method that may work for some.  Too bad MS can't support this on their extenders by default :)

UPDATE 12-02-2008: 

Ok so this will make sense if you read the entire thing.  I couldn't do WMV output with a 3000 bitrate..which is weird because Windows Movie Maker can do it.  I tried using WMV 8 and WMV 9.  So what I have found best is to use MPEG-2 straight from DVD and set the resolution to 720 x 480 and set the bitrate to 3000.  Also switch the audio to 128K.  This worked quite well.  A 1 hour and 50 min movie was about 2.67 GB.  Which isn't bad.  It took 53 minutes to create..which is awesome compared to the free method below!

What's good about this file is I can take it and make it a nice WMV for my Zune if I wanted to as well.

UPDATE 12-01-2008:

Ok so as the below method worked perfectly fine.  I was tired of using so many programs to accomplish what I wanted and the time it took to actually convert to a WMV file. So I decided to actually see what retail software out there would do this as well.  I came across a piece of software by CucuSoft called Ultimated DVD and Video Convert Suite:

http://www.cucusoft.com/ultimate-dvd-video-converter-suite.asp

This software is pretty awesome. I spent the $60 and gained time that it takes to convert.  And I can convert a DVD to almost any file format I would like.  In addition, I can convert video files from format to format.  I would recommend downloading their trial version as it is the full software, but leaves a watermark on all videos. But this way you can see if it does what you want.  I have tried the following methods for conversion:

1) DVD to WMV using WMV 8 at default levels
2) DVD to WMV using WMV 8 using 29.97 framerate, 1500 bitrate and 128k audio
3) Shrink down DVD via DVD shrink then use that as the DVD source and use either method 1 or 2 above
4) DVD to MPEG-2 switch resolution to 720 x 480.

So far method 2 or method 3 and 2 combined have been the best for quality. 

The one method I have left is method 2 above but switching the bitrate to 3000. 

The time it takes is anywhere from 45 minutes to 1 and 1/2 hours.  However, I'm sure it will take longer with the 3000 bitrate setting.  In addition, each file still ranges from 900 MB to 1.75 GB. 

I tried about 6 movies and all worked ok with no problems.

Anyway the method below that doesn't cost anything still works fine. But the software above will allow me to do anything as well with other video files so it benefited me in multiple ways, not just making WMV files so I can use on my XBox 360 and Zune. So at least I'm pretty close to using my Xbox 360 for more than just video games.  I already use it quite a bit to stream my music library.  If everything goes well I'll go pick up another Xbox 360 and put it in my bedroom so I can stream from there as well. Then I can finally box up my DVD's and store then away so I don't have to keep looking at them!

------------------------------------------------------------------------------------------------------------------

Ok so obviously I always will write something regarding some code or coding concept. However, I'm writing this more on a personal level as to what I was doing, and too be honest I love software and I think that I am able to do this is pretty cool.  And big props to those out there who do design the software that makes this possible.

So this may be old news, but my DVD player recently took a shot and is no longer working, so this is why I got interested in this concept in the first place.  Here is my setup that I currently have

Home Theater system with my Xbox 360 in my living room, and my Windows Vista Ultimate PC in my office.  The Vista box is running a 2.13GHz Core 2 Duo with 2GB of RAM. Yes I know I need to get more RAM, because I also run Virtual PC on here for development purposes.

So since Vista runs Media Center I wanted a way to utilize my Xbox 360 and Media Center to watch my DVD's.  I know I can just pop in a DVD into the 360 but that is besides the point as I'm trying to get rid of having to store all of my DVD's in shelving units. 

Here is what I'm doing to watch my movies via streaming from Media Center to the Xbox 360.

Overall concept is the following:

1. Shrink the DVD to about 4.37 GB
2. Convert the VOB files to AVI files
3. Convert AVI files to WMV files

Seems like a alot of converting but I promise the quality is fine to watch the movies on the 360.

Software Required:

1. DVD Shrink - download it via the link below

http://www.dvdshrink.org/where_en.php

2. DVDx - I actually found this via a Wiki article here

http://www.wikihow.com/Rip-a-DVD-to-an-AVI-or-MPG-File-Using-DVDx

Note: When you download DVDx it will install an XviD MPEG4 Codec and AVISynth Codec as well (you need them both)

3. Windows Movie Maker (built in with Vista Ultimate)

Now I'm not going to go into tons of detail on how to use the software, just what I have done.

- Run DVD shrink and backup your DVD to your Hard Drive to a location your specify. This process takes anywhere from 7-20 minutes

Once this is complete you will have 2 directories, and AUDIO_TS and VIDEO_TS. You can Ignore the audio one

- Now open up DVDx and follow the steps above in the Wiki Article. The only thing I changed from the article is loading up from a File and changing the resolution to 720 x 480

This process takes anywhere from 1.5-2.0 hours.  The end result will either be one AVI or two AVI's.

Next and final step is to convert those AVI's into WMV's so they can play through the XBox 360 Extender.

- Open up Windows Movie Maker and import the AVI's created from the step above.  Drag the two AVI's onto the storyboard and Publish to the computer.

When you publish select "Windows Media DVD Quality"

The end result of this will be the WMV file that allows you to watch the movie via the 360.

So far I have done about 7 movies and the file size averages about 1.6GB per movie.

NOTE: Keep in mind the WMV file is strictly the movie and nothing else (i.e., menu, extras).

VIEWING MOVIES VIA THE XBOX 360

Go ahead and start your XBox and fire up Media Center at this point.

Browse to your WMV file via Media Center and select the movie you want.

Now depending on what TV you may or may not be satisfied with the view.  I personally have a 42" Plasma TV so I have the black bars on the side of the movie.  To eliminate this, I set my Zoom Setting on my 360 to Zoom 3.

And that is that to make your DVD into a WMV so you can stream it to your Xbox 360!  Like I said I have done this with about 7 movies so far and haven't had any problems.

Oh yea keep in mind I'm not a hard core media/video guy...I usually rather spend my time coding or hanging out. But considering my circumstances with my DVD player failing I decided to do this and it works excellent!  Enjoy

I promise I won't write too many of these types of articles, but I couldn't find any useful ones that didn't require configure my box, xbox or media center all wacked out.