Up until now, I haven't really recommended the otherwise excellent (“thanks” to Apple's overly strict and - in my opinion - when it comes to video playback, absolutely unnecessary restrictions, jailbreak-only) XBMC multimedia player for iPad 3/4 users playing back high-resolution videos.
The reason for this was, as has always been explained in my articles, the lack of Retina screen support.
Now, take a look at the next two screenshots (click the thumbnails to get the original shots! Don't even try to evaluate the video playback resolution using the thumbnails):
Yes, that video player, as you can immediately recognize from the controls, is XBMC and yes, it does make use of the full resolution of the Retina screen of the iPad 3 and 4.
You need to download the file from HERE (linked from THIS forum post, from THIS XBMC Retina support-specific thread), transfer to your iDevice and, in the same directory, issue the “dpkg -i xbmc*.deb” command via SSH. The official nightly tutorial HERE (more specifically, the curl command) won't work.
Note that this file is somewhat older (alpha 7) than the current, latest (as of 30/Nov, beta 1) nightly version. Nevertheless, I've found it pretty usable and, again, the latest nightly does NOT support the iPad Retina screen, only this Retina-specific one.
What about AC3?
While now almost all AppStore apps had to drop AC-3 (one of the most essential and widely used audio standard) support, this version of XBMC supports AC3 audio just fine – as does the current (30/Nov) nightly HERE (main list page link).
The (compared to the better AppStore apps) two other, biggest problems remain, both related to rendering video on external screens. (Note that XBMC – and, for that matter, the other notable, jailbreak-only player, RushPlayer+ - still remain the only player to be able to play back non-iOS-native file containers with H.264 video in hardware – for example, MKV files from UPnP servers. And that's just one of the reasons they (and, most importantly, XBMC) is better than all AppStore players in many respects.)
AirPlay client mode is not supported at all – unlike in most AppStore players. That is, you can only send your content to an AirPlay receiver like an AppleTV in mirrored mode, which means far inferior quality compared to the native playback of (strictly) iOS-native file formats (MP4 / M4V / MOV).
On the other hand, there is AirPlay server support (needs to be explicitly enabled in Settings):
And AirPlay clients can connect to it (in non-mirroring mode only); here, my iPhone 5:
As far as iOS-native file formats (MP4 / M4V / MOV) are concerned, they are sent to XBMC as is; this means full-quality playback, apart from the hiccups in the first some seconds. The following screenshot shows the file indeed gets transferred – here, it has a completely random name, proving it's indeed a local and, to avoid name clashes, randomly-named file that is played back and not a direct multimedia stream:
From third-party, AirPlay-capable players like GoodPlayer or BUZZ Player, non-iOS-native files won't be transferred to XBMC, not even ones (e.g., MKV's) that can be played back by XBMC, unlike, say, Apple TV. As usual, only the audio is transferred in this case.
Note that, from the stock Videos app, if you try to stream non-local files (that is, ones on a desktop computer shared over Home Sharing), XBMC will only play back the audio track, even with unprotected, iOS-native video formats – that is, with formats where the file itself gets transferred over AirPlay instead of the mirrored screen. That is, this AirPlay server can not be used to receive video in any way over Home Sharing. This doesn't have any effect on playing back local content.
2. VGA / HDMI cabled output
The VGA / HDMI adapter-based output isn't supported either (yet). All you can do is playing back video in mirrored mode with all its problems (non-Full HD resolution etc.) Unfortunately, the same applies to the most current nightly build.
This is a shot of a filelist in this version of XBMC, showing the content shared by a UPnP server:
UPDATE (01/Dec/2012): The latest, 12.0-series of XBMC does support TV out via the HDMI / VGA adapters, as opposed to what my original article stated. Please see my full, dedicated article HERE. It also has a section (the last one) on how alpha7 (or the, as long as you don't need high resolution rendering in- or externally, the current nightlies) should be installed.