Now that I have my new HDMI powered home theater system fully operational some of the flaws of Netflix streaming to the Xbox 360 have become very obvious. The Netflix streaming is designed around streaming content to a PC which means that Netflix simply assumes you're outputting sound through two lousy PC speakers. How does that kind of audio sound coming out 7 quality speakers and a sub? Like crap.
The other issue is the way Netflix adjusts your picture quality. They use a bar system between 1 and 4 bars that represents your network connection. 4 bars gets you HD, when available. This generally works great, but as soon as Netflix detects a slight change, even for a moment, the streaming is interrupted and you lose the HD stream. The change is very noticeable.
However, the picture quality is great with 4 bars.
Screwed (SD) viewed on my 1920x1200 laptop
I still Netflix streaming is absolutely freaking fantastic, but this is disappointing. The good news is Netflix claims better audio is in the works, but does not say when that will be available. Netflix technicians also have suggestions for the HD streaming.
They say that the cause for the interuption and downgrade is the buffer has run out and the network connection didn't pick back up at 5.5 MBps, so the buffer was filled with 2 or 3 bar streaming. Their suggestion is to pause your movie/show for around 10 minutes to let the buffer fill to it's maximum 10 minute stream and then watch it. Apparently contracts limit the buffer to 10 minutes to avoid piracy and this is why you may frequently run out of buffer while watching an HD movie.
I'll still watch just as much streaming video as I do now, but I won't use it for videos I want to see. I will continue to use it for those movies and shows I don't want to wait for or pay money to rent/buy.