Higher quality transcoding/alternate format

I own a Sony KDL 40EX403 so I'm using profile 9. Until recently, I've been watching a lot of TV via a USB pendrive that I loaded with AVI files.

My TV seems to be able to play most DIVX or XVID files that I throw at it on a USB pendrive - however, it seems when the same files are viewed over Serviio or the other DLNA servers I've tried, it transcodes them to MPEG2.

This has 2 main problems - firstly transcoding them to MPEG2 makes them look worse. The picture quality just drops about 30%.

Secondly, this also causes a problem with the aspect ratio which has been widely discussed in another thread.

Is there anyway of forcing AVIs to be transcoded at a higher quality or to be transcoded into an AVC format which I assume offers a higher quality at a comparable bitrate?

Or alternatively, is there any way of making my TV play them over the network without transcoding them at all.

P.S. I have a bunch of 1024x576 MKV files using the AVC1 codec that look absolutely perfect... they aren't being transcoded are they?

I pretty much got this.

1. Serviio doesn't yet support transcoding to AVC. The MKV files my TV can play are supported natively as AVCHD over DLNA is supported. AVI over DLNA is not supported by Bravia 2010 TVs for presumably random reasons.

2. The loss in quality probably comes from the fact I've had to zoom in on the AVIs to get them to the correct aspect ratio.

[patters]

Your second post is true. Transcoding to AVC is generally not worth it as it's computationally expensive to do. You'd have a modern PC pretty much flat out to manage real-time with good quality settings.