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Need help converting videos with xbox 360 and codecs?

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I bought myself an external hard drive 1 terabyte because i was running low on gigs on my PC. I download a lot of movies, tv shows etc. I converted the hard drive to a fat 32 because i want to play the movies and other things on my xbox 360. The only problem is that my xbox won’t support half the things. I am pretty sure it is because it wont support the codecs. I need to know how to change the codecs so that my movies are compatible with my xbox 360. Also i need to know the different kinds of codecs that xbox 360 can support and is there one that is better than the rest? Because i know that if i change the codec i might lose some quality, but is there one that wont make me lose quality or if i do lose is there one that will make me lose minimum quality?

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