Yeah, sounds kinda familiar...and why I hate MCE. I Use PowerDVD for HD-DVD playback, WinDVD for Blu-ray and DVD's. Catalyst Media Center for video/TV recording. I paid for PowerDVD and WinDVD, they were both pretty expensive.
It can be a right pain to set up many HTPC software, and sometimes they screw with each other because of what codecs they use.
It's still not perfect...I've yet to find a software that works for everything, and it's pretty frustrating. In the end, when it comes to most video, I'll convert it to .mp4, and stream it to my PS3, now that I have one. The unfortunate truth is that the softwares that exist right now are limited in thier codec support, so there's not much to do but pick the interface you like, and covert your video to work with it, rather than covert the software to work with the video...
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