ok, i got my zune to play a 640 by 480 hd video. The problem was the video was glitchy.
I did this by using the hd hack to just manually put it in there.
Now my xbox 360 did play the 640 by 480 with a 1745 bitrate video when i pluged the zune into it.
So, tomorrow i will try to get a 640 by 480 with a lower bitrate, something like 1200 or 1400 and see what happens. The good thing is we may be able to find a work around for television output.
I do not have a tv out cable, just my xbox 360 which does just uses the zune as a hd and processes the video internally. So, i will have to go pick one of those up soon to see how it works without using the 360.
I will be working a double shift tomorrow. I will be back sat evening or sunday morning.
I will keep you up to date on how it goes. please post if you found the limits of the zunes video processing.