Why must I sign in to Live! to play avi's and mkv's?

I have 2 xbox 360's on my network one in the living room for gaming and one in my bedroom for extending media centre. During the beta and RC phase builds of Win7 the 360 upstairs needed either a memory card or HDD and connecting to live in order to play avi's and mkv's (media update). I remember reading in a thread here this was due to the fact it was beta etc etc and that this would not be needed when rtm'ed well as you've probably guessed I still need to have HDD and connection to live, I wouldnt mind if it was just the HDD that was needed i.e to store the media update but why do I still have to sign in to live?? if anyone wiser than I could shed some light on this it would be appreciated.
thanks
settingsun

In RTM you no longer need a hard drive or memory card for 360 MCX to work. Several users have reported it and I tested it out with mine as well. Newer Arcade 360's never needed it as they have larger internal memory than the originals but I have an older original 360.

In terms of Live!, I did not test that but will when I get home. What exact build are you running?

Edit: I just reread your thread a little closer. Are you using Media Center Extender functionality or simple Media Sharing?

thanks for the replies. I'm using the extender function, the 360 in the bedroom is a 2006 model so this is probably the issue. When pressing play on a movie it will prompt me for a 'media update' and to sign in to do this however the media update is already on the HDD (about 2mb) I sign in it downloads nothing and starts to play. Oh and I'm using build 7600 rtm.