If I understand your problem correctly, I believe this is the problem:

You have to have an intermediate PC setup for Media Center with your Xbox. This intermediate PC has to be turned on when you are using your 360, and this intermediate PC must have media center AND access to your WHS.

It is this intermediate PC which you must "set up" with your 360. (in other words - you cannot directly access WHS from the 360. I know it sounds weird, but believe me it is absolutely impossible.) After this, you be able to go back into your 360 and add your WHS folders as watched folders.

Also, you must have the Guest account setup (without a password) on your WHS. The 360 uses this to access your folders (as MCX1 or something like that).

BTW - I made a post that addresses this here: http://www.indygaming.com/how-to-add-folders-from-your-windows-home-server-to...

Server: HP EX475 (3TB - 2GB RAM)
Extenders: XBOX 360, PS3, HTPC
PC's: Various notebooks and PC's with Win7 HP
Router: Linksys WRT310N 1.0.06b1
http://www.indygaming.com/

I know exactly what you hade in mine...If you look long enough you'll see your own question posted. Well I was thinging the same thing. I was hoping my WHS would connect to my xbow 360 the same way, access Media Center feature and not have to go thru my pc. This would have been great, Media Center platform looks great and would have access to all my media on the server. No need to have any other pc on the network to do this. Oh well maybe on the next OS upgrade this feature could be added....This would have made this server a marvelous device.
The Genearl