mflanagan said he cares about image quality. Don't re-encode the Blu-rays, rip them to MKV with MakeMKV, which retains the original quality, but discards unnecessary audio tracks and extras on the disc to save space that way.
If the Xbox can't stream those files directly, use software that transcodes on-the-fly when it's streaming.
That way you have Xbox compatible streaming, but retain the original quality for watching on the HTPC, or future devices. The Xbox One/PS4 may be able to stream those files without transcoding for example.