Ok Guys..Further to my earlier post...here are few observations.
Audio:
Dolby TruHD -
OK (30mbps-L4.1-TrueHD.m2ts) File from AVS Forum
Dolby Digital Plus -
OK (hd_dolby_digital_plus_channel_check_lossless.m2ts)
DTS HD MA 7.1 -
Not OK 
(hd_dts_orchestra_long_lossless.m2ts)
AVR (Denon 1610) shows DTS. Fellow users of WD TV Live please confirm on this. I didn't set up the AVR completely don't know that can be a reason.
Video: (Apart from regular formats)
WMV9: 1080p WMV9 video with 5.1 WMA audio : Plays Flawlessly
MP4: 1080p L5.0 Apple trailer with 9 reframes and AAC audio : Plays Flawlessly
RMVB: Doesn't play
DVD movie which is dumped to HD without any change : Struggles to play
iTunes Movies( After removing DRM) - Plays perfectly.
Sources :
http://www.avsforum.com/avs-vb/showthread.php?t=1181902
High Definition Trailers (HD) - Demo World
Regards
Satya