I use PSM with my XBOX360 and it is awesome. I can watch 720p with external subtitles perfectly. The only problem i have is that you cannot FF or RW, so when something happens you have to playback the movie just from the begining again.
I wrote a post aking for a feature so you can start enconding from point: hh:mm:ss, but someone told me PSM has Chapter feature for jump time on playback.
I tried it but doesnt work. It keeps loading 4 times until gets 100% but after nothing happens, just black screen. On PSM i can see its buffer growing but no playing video, bitrates keeps on 0.
I tried with 1.6 and 1.72
If you need me to post debugs or something just ask.