To answer your question, the transcoder works great. I've only had one problem with it so far, and that's just because one of my movies has been transcoded in a different format originally, so I get sound but no picture when on my Xbox. And the other thing is I have to pause the video when it first starts to give it some time to transcode, since my computer isn't fast enough to stream completely.
And for Vista, I've had very few problems with it. You'll hear a lot of BS from people who haven't used it saying it's shitty, but so far for me I haven't had many problems. Mainly all I've had problems with are program incompatibilities. I found out that AIM just fucks up my computer, with the newer one not working at all, and the older one randomly working, and disabling my sound and networking to where I must do a restore to fix it. AOL is too lazy to fix that. And now drivers are starting to come out that work very well (ie: Video). So I'd say Vista is a pretty good choice right now, of if not now, soon.