Well, actually WDTV Live plays the .MTS files encoded in AVCHD but it DOES NOT SUPPORT playback of AVCHD folder structure in WDTV Live.
In fact I can navigate to the “PRIVATE\AVCHD\BDMV\STREAM” folder and playback the .MTS files from my Canon HF200, BUT (and this is a big BUT) there is a HUGE gap (black screen) between one .MTS file and the next one (it means that for every scene I recorder with the camcorder there is a black screen that takes 3 or 4 seconds until I get the next scene). So it is basically impossible to watch a family movie with dozen on MTS files (the 3 or 4 seconds each scene change is a NO GO).
Meanwhile, when I plug the SD card from my camcorder into my PS3, it RECOGNIZES the AVCHD folder structure and plays back all my recordings WITHOUT ANY gap between the scnes.
Bottom line is that WDTV Live DOES NOT support playback of AVCHD folder structure (so it does NOT support AVCHD standard) (if I am missing something here please let me now).
Please see http://en.wikipedia.org/wiki/AVCHD to check what I mean by “AVCHD folder structure”.
I have already entered a new suggestion to WDTV live in the ideas section:
Please check the link above and give your vote to this idea so we can grab some attention from WD regarding AVCHD support.