There may not be a single great feature added in this update but there are many really good ones.  The first change you will notice is the Inside Xbox button on your Xbox Live blade.  This new feature will offer news about Xbox from the Xbox.com crew.  I know I never bothered to check out their content on Xbox.com but now that it's easily accessible from my 360 I'll check it out.

A very much needed reorganization of your games and videos is now available.  Both now offer this idea of a "twist" UI that you can move left or right to get to different content.  Before all your videos where dumped in one area and it made it fairly difficult to find content you downloaded to your 360.  This new UI organizes videos into five categories: All Videos, Movies, TV Shows, Misic Videos and Game Videos.  This was so needed I am very happy they cleaned this area up.

Now I'm not very interested in the Xbox Originals but to sweeten the pot now you can download free Themes and Gamer Pictures for these games.  I downloaded the Halo and Fable gamer pictures and themes since they where free.  I like the Halo theme and am using it now.  I hope they keep this up for future Xbox Originals.

For all you owners of burned DVDs you can now stream Divx and Xvid from your PC to your Xbox 360.  Seems Gizmodo tested this out and gave it very favorable reviews.  This feature will also be coming to the PS3 but Xbox managed to beat them to the punch.  I downloaded the 28 Days Later trailer and after being prompted to download an update streamed the video from my PC to my 360. 

There is no killer feature like IPTV people were hoping to see but overall I think it's a sound update.  The Xbox 360 is now the best home media device now that you can play almost any video format.  They have the top content download service for TV and Movies as well.  I wonder how many people will end up getting a 360 just for it's Xvid and Divx support?  Watch  TV shows and Movies on your computer sucks compared to watching them on your TV.