I bought one of these (HD680) a couple of weeks ago to replace my WDTV (original model).
Most of my videos are mkv (x264 and ac3), but I did play a couple of xvid encoded & tried .m2ts with DTS-HD and it played all of them fine. I have my tv connected with HDMI and no surround sound system.
In my opinion, the weak point in the unit is the remote control, specifically that the remote needs to be pointed directly at the unit even if I'm only 15ft away. I had a Poloroid DVR that acted the same way and some people replaced the LED in the remote, but I'm not that adventuresome at this point.
I have a WD Mybook network drive that I store my videos on. The network drive does not show up under the Movies icon. If I browse through the File Manager icon, I need to go through UPNP rather than go through the Network icon otherwise the movies are not sorted alphabetically. There doesn't seem to be a way to sort the movie titles. I have exchanged emails with sales/support to try to work through this and hopefully improve the unit via a firmware update. It will give a sort option on a drive connected via USB.
I am not using the wireless, I have the unit hardwired to a network switch.
Overall, I really like the unit.