Walter - do mpeg2's work? Sure. They work great.
And I'm telling you nothing you don't know when I say that h.264 is a more advanced codec than mpeg 2- and provides better looking files at the same exact bit rate.
So, at the same file size, you're getting a less 'damaged' file. I haven't bothered to go out and do extensive testing on a variety of blue ray players - it's just the ones I've built work (or don't work) regardless of MPEG 2 or h.264 encoding. I haven't bothered to try in windows for VC-1.
Best,
Jeff G
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