Using the XBox360 Preset to Encode HD Content
To allow the encoded files to playback seamlessly in most environments, including when streamed on a wireless network, the XBox 360 preset uses a bandwidth of 4Mbps while preserving the video frame size of the original file. This is fine for standard definition content however will produce mediocre output for 720p sources and will be even worse for 1080p content. Because of that, I would advise tweaking the video bitrate to your specific needs. So, if network speed isn't an issue, I would personally recommend changing the video bitrate to something like 6-7Mbps for 720p content or 8-10Mbps for 1080p content, which is still within the Xbox360 supported limits for VC-1 decoding.
Finally, it's important to note that the Advanced VC-1 video profile is not supported by the Xbox360 (nor the PS3 through Media Connect), so it's probably best to leave it as "VC-1 Main", like the XBox 360 Preset does.