I am trying to decide if it is worth upgrading my Windows XP machine which is currently using Zune to stream Mp4's to my 360, to Vista Home Premium to stream raw DVD's to the 360 with 5.1. What are the pros and cons of doing this? is it worth it?

If that's the only reason you have for upgrading to Vista, beyond the advantages of DX10 for games and the other advantages, I'd say no.

Do you have a ton of raw DVD dumps? Why not just spend ten bucks on a pack of blank DVDs and play those in your 360? Saves hdd space at least.

I have a ton of backup up DVD's, but I really like the speed and ease of converting DVd's to MP4 (or raw) and storing them on my PC, then streaming them.

I guess my thought was is the quality of a high-quality MP4 better or worse than a Raw DVD through Vista?

I have tons of Blu-Ray movies with my PS3, two upconverting DVD players, an HD Tivo, and a hacked Xbox with XBMC I use to play heavily, heavily compressed TV shows.

To be completely honest, my TV does such a good job upconverting, and the matrix modes in my receiver are so good, most people can't tell the difference between pristine 1080p and sub-480i net downloads. Of course I can, but it's not like a VHS-DVD difference. Even the crappiest MP4 is going to look pretty damn close to a raw DVD.

It's not going to be better than a streamed DVD, but after a few minutes, as long as you're not inches from the TV, you probably won't be able to tell the difference. The neighbor upstairs or noise from the street will have more of an impact on your movie experience than the difference between streamed DVD and MP4.

It's probably the same reason most people who own HDTVs aren't even bothering to get Blu-Ray or HD-DVD.

I wouldn't bother, if that's your only reason for upgrading.