Those of you following this thread since the beginning know that Ceton heavily implied that the Echo would have good media playback capabilities beyond just mpeg2 TV. At least, in response to a series of questions regarding media playback capabilities, Ceton responded that they would make sure "video content from *cough*popular internet sources*cough* plays properly." Based on the preceding discussion, there was a general understanding that somehow high bit-rate video in popular containers would work, and probably decent audio support (at least passthrough).
Perhaps it should have been more of a clear sign of trouble that Ceton again and again refused to comment on container support. It wasn't until right before the retail launch that they addressed that issue in the FAQ. Ceton has never, as far as I know, commented on bitrate limits or H.264 levels supported. Generally speaking, it should have been a safe bet that anything reasonable would play back, since the Echo's hardware is pretty beefy. But, it turns out, that wasn't a safe bet.
I think it was kind of sleazy for Ceton to egg people on into thinking media playback support was going to be decent. When they figured out it wasn't going to be they should have just fessed up to it. I'm sure Freescale is probably mostly to blame for the actual problems/limitations, but Ceton is the one with the product, so they're the ones that should have come clean on what their product was and wasn't going to do.
And I have a hard time thinking the whole Windows 8 thing came out of the blue. There were signs going well back into the Win8 beta that showed MS was making changes impacting backward compatibility. I also don't fully understand the issue. I thought it was just an RDP issue. MS moved to RDP 8.0 with Windows 8, which is how the UI is streamed to extenders. Can you use RDP 8.0 with WMC extenders? If so, RDP is mostly an open protocol, so Ceton could implement it. If WMC won't even use RDP 8 then there probably were signs of that a long time ago.
Side note: A particularly cynical interpretation of Ceton's "internet sources" statement actually suggests it was a moderately accurate statement. Pirated media, in general, is often much easier to play back than legitimately ripped media, like full-bitrate blu-ray rips. Still, in the context of other posts, Ceton's post was misleading.