Just about gave up on this server, but continued to look for a solution and finally found it.
I wanted to post solution as I can't believe I am the only one who will run into this.
The solution is you need to make sure you don't check the Hide #Transcode# folder. I checked this box because I did not think I needed it. The PS3 can see the files directly, but for some reason the xbox360 needs this folder and that is where the movie files are.
Now I need to figure why the #Transcode# folder shows multiple versions of the movies in this folder to play. Also need to figure why I am pillar-boxing on xbox360, but not on PS3.
Still can't get music to play via PS3mediaserver on xbox360 as well, but not as concerned about that,