Very good points. As you probably know, Matroska (MKV) is still very rare in the hardware world. In fact, I think of all the players I've seen, only the WD TV HD natively supports it.
Streaming video looks good on the DSM-750. In fact, it looks good on most players if you have a solid LAN connection. In general, I've found that the quality of the source video is carried over to the TV pretty faithfully. If you start with 640x480 video shot with a digital camera, it's going to look grainy and blocky...which is just how it looks when the DSM-750 passes it to the TV. This is the lowest resolution I evaluated players with, so I'm not sure how much upscaling you're asking about. Having now tried over half a dozen extender-type products recently, I can tell you that I found all of them satisfactory for video playback. The quality bottleneck is almost always with the source content.
I'll add that I also tended to avoid upscaling in my tests. I'd rather look at a higher quality image in the center of the screen than a blocky, interpolated one stretched across the whole display. I know that's not the perfect, quantified answer you were probably hoping for, but I tested these products as I thought they'd be most commonly used by the average user.
This details how to do DivX and XviD on the Xbox 360. So far as I've seen, MCE is MCE no matter what you run it on, so I'd say the odds of this same work-around taking care of you on an MCE extender like D-Link's are good. If you try it out, please post and tell us what you find.
I passed your question on to my D-Link contact, who replies:
"Yes, the advantage of the DSM-750 is that it has both Extender mode as well as MediaLounge mode. So while the Extender mode is great for people with a Media Center PC, the DSM-750 works with everything else also."
For more integration specifics beyond the bounds of this story, I should probably refer you to D-Link's forums.
I have a dsm750 running over 100mbit against TVersity media server. Firmware version 1.02 supports MKV, but for some reason the audio does not playback properly....very, very, low sound.
Also, the HD playback does not work properly for me. It pauses/hiccups/stutters every 10 seconds or so...even when playing from USB or the DLink ML server. No joy from DLink support so far...."it works for us" is the reply. The unit works flawlessly for std def content. Have had a dsm320 for years and love it.
I would have hoped the 750 would not be giving me so many issues with HD content....
The Wii works if you run your content from say TVersity to the Wii via the Wii Internet channel. The big issue is that it only supports DLNA and not uPnP. I actually purchased a copy of Nero Home media to use their player through DLNA and have run into a whole host of issues although on several forums in older versions it supposedly worked well.
The othe problem with the Wii through the net channel is the big row of icons on the bottom of the screen for navigation or whatever.
My take on it is, its do-able but not preferred if you have another choice.
Look at the Popcorn Hour. It claims to play MKV video containers as well as the open standard loss-less audio format FLAC. The D-link looks like the usage / interface is the focus where the Popcorn Hour the focus in on the media formats and less on the interface.