I just purchased Netflix last week once a plugin for Vista Media Center was available (vmcnetflix) that allowed me to stream the Netflix "watch now" content through my xbox 360. It took me the weekend to get it working (all plugins and hacks seem to be the same) but it's working now.
The quality doesn't seem to be quite dvd for me, and I have at least an 8mbps at home and 12mbps at work. Well, dvd's upconverted on my 360 look better than what's on the netflix. It's still totally watchable and forgivable for tv shows and documentaries, however I don't know how many movies I'll be watching at the moment. You can tell it is compressed. Sign up for a free trial and check out for yourself how they look on your computer. Some movies and shows which I think should be in widescreen are in fullscreen fyi. Also, everything is in stereo at the moment, no 5.1. You don't need to download first, it starts streaming after queuing up the movie for about 30 seconds or so. I haven't been able to FF or RW without it locking up.
ALL THAT SAID, I think it's great what Netflix is doing and I know they will continue to get more content and improve on this (so will the plugins for media center). This is more than worth $9 a month to me (you also get 1 dvd at a time with this which pays for itself after the 2nd rental). Right now I have my dvd's ripped to the hard drive of the $500 HP PC I bought on buy.com, and I'm streaming them through my 360 in the living room using My Movies plugin for Vista Media Center. I'm also recording OTA HD using a tuner, I have all my music and pictures as well as now having Netflix on-demand without having to get off the couch. I'm darn close to being in 480P heaven
My wife absolutely loves it and she can watch all the chick flicks and musicals and old movies she likes (this alone is worth $9 a month). There is a large library of old movies and romance.
Make it all high-def and uncompressed audio and I need not leave the house except to play golf.