Plex streaming works close to perfection. It is not 100% smooth but basically it's transcoding on the PC on-the-fly to MPEG2 (I think). At present the Android app does not support subtitles but they are coming. I've been able to play nearly everything over local wifi at 1280x800 with audio at 5Mbps (The highest quality it goes) without many issues. So it CAN play MPEG2 back smoothly it would seem. Just not many H264 variants it seems. At least not with audio decoding that is. If no audio is present H264 plays buttery smooth. I really hope they fix this. As of now I have to pack my TF up tonight ready to send off tomorrow for repair of the busted left speaker.
It's going via DHL to the Czec republic from the UK (EEK!). Scary. :/
I don't expect to see it for 2 weeks. Unless if I am lucky. More if not.