How to get Watched Folders working on 2 MCE PCs

Have both machines on the same network.  If the machines can’t ping each other by name, this will not work.
Share your recorded TV folder on each machine.  Give “Everyone” full control on the share and on the folder itself.  You can name the share the default, “Recorded TV” if you want, that’s what I do.
open regedit, and go to HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Media Center\Service\Recording.  Find the entry “WatchedFolders” and open it up.
On each machine, add a new line to this entry at the bottom, pointing to the other machine’s Recorded TV share.  For example, see below the steps.  You have to do this on both machines.
Click start, run, and open gpedit.msc.  Navigate under Computer Configuration\Windows Settings\Security Settings\Local Policies\Security Options, and find “Network access:  Let Everyone permissions apply to anonymous users”.  open that up, and change the setting to enabled.  Do this on both machines.
Reboot, and check your recorded TV.  Shows from both MCE’s should show up on both MCE’s!
The sample Watched Folders:

C:\Documents and Settings\All Users\Documents\Recorded TV
\\othermachinename\Recorded TV

Alan is a web architect, stand-up comedian, and your friendly neighborhood Grammar Nazi. You can stalk him on the Interwebs via Google+, Facebook and follow his ass on Twitter @ocmodshop.