I picked one of these bad oscars up a week ago B & M for $69, and have tested it with vigor. I've found that it will not play the following things:
XviD encoded with Qpel
XviD encoded with custom Matrices
Any MPEG-4 with bitrates that peak over 4000k seem to skip it as well. (only 2mb of video ram)
Surprisingly it does play Divx encoded with non compliant features such as GMC and Qpel unless the bitrate is extremely high. No problems with b frames on either MPEG 4 format. Haven't tried pre 1.0 Xvid yet, but it plays post 1.0 and DiVX 3/4/5 in all flavors. Some DiVX 3 content displays vertical lines that are barely discernable depending upon your brightness/contrast settings.
I'm using the optical output for the sound and the S-video for the video, running it into a 33" mitsubishi monitor with s-video input. It still looks bad compared to running it from the computer as the 642 is limited to 480i and of course using the s-video it is interlaced which bugs the hell out of me. I haven't been able to test the progressive scan ability of the player as my monitor does not have the correct inputs for it. I've heard mixed reviews of the quality of the PS. Mind you, I'm used to watching everything progressive as I don't have a TV, I use this giant monitor run straight from the computer to feed video directly from my server at 800x600. Compared to a non HD 4:3 ratio TV, the output is pretty impressive. Also, there is a cropping issue with 4:3 ratio material encoded at 640x480 where it will cut off and you can lose subtitles.
Overall however I'm extremely pleased with the unit. For seventy dollars, it plays 99% of what I've thrown at it, even oddball things like ASF. It plays all variety of MPEG 1 & 2 (VCD/SVCD) as well, and I haven't tried WMV yet. I'm pretty sure it won't decode WMA audio but I could be wrong. The firmware is updatable. I don't know about ogg vorbis or OGM containers either. Uncompressed AVI is unlikely because of the size.
The menus are simple and functional, the load times were acceptable, it did not appear to be at all finicky about media. It reads DVD+R as well as DVD-R contrary to the documentation. My unit that I picked up from Walmart had shipped with the most recent firmware already. The player is able to fast forward through MPEG-4 as well at 2, 4, 6, or 8x. Nice perk. Haven't yet found a way to manually enter a time stamp to navigate to however. It would also be nice if there was a way to display codec information to troubleshoot so as not to have to break out the Gspot.
The player can also easily be made region free without modification or flashing the bios, a simply command code given to the remote will do it. Haven't tested macrovision.
If anyone wants me to test anything let me know and I would be happy to help out. Again, can't really beat it for the money.