When I tried it 10 months ago, it wasn't smooth at all. Xvid was good, though.
Does the hypervisor restrict access to usb? Ie, will other devices such as an external hard drive and a tuner card work?
No, it doesn't. External USB drives should work fine, as should your tuner card if you have the driver
10.0 times 0.1 is hardly ever 1.0.