Reciently xboxmediacenter changed how the video playback core was loaded. Now there is preliminary support for multiple video playback units. I am scouting out to see if any of the videolan devs, would be available to port videolan to xbox, so everyone can enjoy WORKING post processing, and better video playback.
The current core is mplayer, and postprocessing is broken. Mplayer also uses much more cpu/ram than videolan which is why vlc is suited better for xbox. The xbox only has 64mb ram, and a 733mhz cpu.
If anyone is able to start or work on a port please speak up, there are over 10k xbmc users who would love to see mplayer replaced.