Since most CD-Rs don't read properly in the X-Box any personally made VCDs won't work unless you put them on CD-RWs (which seem to work better). I don't know if VCDs in general work or not though since I don't know the DVD remote. If professionally made ones do work, then I'd assume that CD-RW VCDs should work as well. (Since it appears that CD-RW audio CDs work if they're burned properly.)
csiro's idea would definitely work if the X-Box gets hacked since they made a VCD player for Dreamcast... Might even be able to do Divx with the amount of power the X-Box has
