I think the video FAQ may be outdated. Based on what I've seen, the current VC-1 decoder can handles spikes of up to about 30 Mbits/s (or even a little higher for the actual stream bitrate, as opposed to the input bitrate which is what you're specifying with peak VBR encoding I believe) without a problem.

the 360 CANNOT handle 30mbit/s. One time i ripped batman begins and instead of encoding it i just stripped the .vc1 and muxed it into a .wmv file with encoded audio. It was the pure video from the hddvd but when i streamed it to my 360 it would stutter like a mofo. So then i re-encoded it at 720p and at around 8mb/s CBR and it played fine. I remember reading that the 360 can not handle anything over 12mb/s i believe.

I know that i tried to do the encodes after the spring 07 update. However they actually never did update the decoder in the spring update Here is some good info for you to read:

The VC-1 decoder in the Xbox dash update should have similar capabilities to the one included in the HD-DVD unit. In other words, any content that came from an HD-DVD disc should play just as well in the dashboard.

It will be interesting to see if the new v2 media center extenders will handle these high bitrate encodes. I have high hopes for the Niveus extender.