Does anyone know of a decent small, cheap, dedicated nas device that can stream (transcode) to an xbox? Does this sort of thing even exist? If not anyone know a small cheap nas that can get linux hacked onto it?
You'll need a fairly beefy CPU to do on the fly transcoding, and all the deciated NAS units I'm aware of have wimpy little MIPS or ARM cores in them that certainly aren't up to the task.
I'd build a mini-ITX based Linux box with a decent CPU, run softraid on your hard drives for stroage and boot from flash. Run your choice of media server, plus samba/nfs and you're good to go. Probably *still* cost you less than a decent dedicated NAS, and will kick the shit out of one for performance.