First, Id like to say thank you guys for your hard work. WHY ISNT THIS A STICKY?
I searched this thread and I know this has been asked before but I am not going to ask "how to" or "will it work". I know it does, I got it to work. I dont have a blu-ray player to calibrate my HD input. I cant afford one right now. My Mit CRT RPTV has no HDMI nor does my Denon 3805. Since I want DD-HD and DTS-HD I would need a blu-ray player with analog inputs for this, which cost more.
Anyway, I used the Windows Movie Maker (WMM) to convert the MP4 files to the xbox 360 HD format. Oh, before I forget, I am using Windows Vista Home Premium Edition.
What I did was unzip the MP4 files. I dragged the Main Menu files to the WMM then converted the files, that easy.

Turn on my xbox then looked for the file where I save it. Push play, and there it is, on my big screen.

I was able to skip each section or skip the chapter. Loved it. Now I can calibrate the HD input on my TV.
Why would I want to calibrate my xbox since all the games dont follow any standard? Well, you can stream movies using netflix on Xbox or purchase movies through the market place in HD. Although you are limited in HD movies from Netflix
Hope someone can asnwer my question, Does WMM convert the file to the correct format?
Here are the options to choose from when converting:
You can choose to publish your movie as an Audio-Video Interleaved (AVI) file or a Windows Media Video (WMV) file. You can also choose different settings for each file type, depending on what format you plan to use to watch your movie. The quality for each setting generally falls into one of three categories: high-quality, good-quality, and medium-quality. The following table describes the different settings.
File type
Resolution
Bit rate
Recommended use
DV-AVI (NTSC)
720 x 480
25 Mbps
This setting produces the highest quality output in most situations. It is a good choice if you plan to play your movie using an application that does not support Windows Media Video (WMV) files. Because the quality is so high, files saved using this setting are larger than files saved at most other settings.
Windows Media Portable Device
640 x 480
1 Mbps
Choose this setting if you plan to play your movie using a portable device that uses Windows Media Player. Windows Media Player will automatically convert your movie to a format that will work on your portable media device.
Windows Media DVD Quality
640 x 480
3 Mbps
This setting produces good-quality standard definition movies. You might choose to use this setting if your original content is from a digital video (DV) camera and if you want your saved file to be small.
Windows Media DVD Widescreen Quality
720 x 480
3 Mbps
This setting produces good-quality widescreen (16:9) standard definition output. This is a good choice if your source content is from a digital video (DV) camera if you want the file size of your movie to be small.
Windows Media HD 720p
1280 x 720
5.9 Mbps
This setting produces high-quality high definition (HD) movies in Windows Media Video 9 (WMV9) that can be played on computers and DVD players that support WMV HD. Consider choosing this setting if your source content is 720p or if your final output display is 720p. This movie setting is only available if your computer is running Windows Vista Home Premium or Windows Vista Ultimate.
Windows Media HD for Xbox 360
1280 x 720
6.8 Mbps
This setting produces high-quality HD movies at 720p, and is a good choice if you intend to view your movie using an Xbox 360. This movie setting is only available if your computer is running Windows Vista Home Premium or Windows Vista Ultimate.
Windows Media HD 1080
1440 x 1080
7.8 Mbps
This setting produces high-quality 1080p HD movies. It's an ideal setting if you plan to show your movie on a computer or DVD player that supports WMV HD. This is also a good choice if your source material is 1080p. When you use this setting, your movie is de-interlaced during encoding, as WMV9 does not support interlaced content. This movie setting is only available if your computer is running Windows Vista Home Premium or Windows Vista Ultimate.
Windows Media Low Bandwidth
320 x 240
117 Kbps
This setting produces good-quality standard definition output. This is a good choice if you want the file size to be as small as possible.
Windows Media VHS Quality
640 x 480
1 Mbps
This setting produces medium-quality standard definition output. This choice is ideal if your original content is from an analog device, such as a VHS tape, and you want the file size to be small.
Again, thanks for your hard work.