Lots if nice new stuff in the update, some subtle UI updates, social additions but most of more video support
Full feature list: http://www.xbox.com/en-US/support/systemupdates/20071204-features.htm
Video tech details: http://blogs.msdn.com/xboxteam/archive/2007/11/30/december-2007-video-playback-faq.aspx
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