Xbox 360 Spring 2007 Dashboard update did land at about 2:00AM PST as expected, and brought with it a few fun features we were hot to test out -- but none more than the Xbox's expanded video playback capabilities. Before we get to the fun part, though, it's worth noting that the whole Dashboard experience felt a lot snappier; if you ask us, they made some worthwhile performance tweaks. Since we don't use MSN all that much 'round these parts we couldn't delve too far into the new Messenger contact list capabilities, so we'll get to the good stuff: you want to know about the video. Well, we're happy to say it works as advertised. We were able to play back 720p and even 1080p MPEG-4 and H.264 content on our Xbox 360. Technically speaking the Xbox 360 now officially beats out the Apple TV in the digital video arena, both in resolution and bitrate. (At best the ATV only does up to 720p at 5Mbps, while the Xbox does 1080p up to 10Mbps; neither supports higher than stereo audio.) In other words, if you're an Xbox owner thinking about an Apple TV for playing back video in your living room, you might want to think again. Expanded test results after the break; check out the hands-on / walkthrough of the update in the gallery.
Update: Microsoft posted an extremely useful video playback FAQ. Check it out.