The new Xbox 360 could have full Media Center PC capabilities, but it doesn't. Instead, it can talk to my Media Center PC and can reflect all of its functionality through the Media Center PC, so I can play videos stored on the Media Center PC or control the MCPC's TIVO-ish functionality through the Xbox.

But the Xbox 360 is way more powerful than my Media Center PC! It's certainly a more capable media player and/or TIVO knockoff than my Media Center machine could ever be.

There's certainly a reason for it. Not sure what it is, but there's gotta be an explanation as to why the Xbox can only act as a conduit when it comes to playing media.

Probably some dumbass business reason.