More info about the Windows 7 decoders and encoders can be found at istartedsomething. The site also unveils Microsoft will build transcoding capabilities right into the Windows 7 shell:
From what I can at least gather from the presentation, transcoding is actually built right into the Windows 7 shell. That is, if you drag and drop a video from your desktop to your portable media player, the conversion will happen automatically. Personally, anything that removes unnecessary third-party bloatware to add content to portable devices gets my vote.