I am unable to play DivX and Mov files offline after the recent dashboard update, i constantly get a prompt to sign in to xbox live and get the optional media update, which i already have on my xbox, these video files play properly when connected to xbox live, i deleted the optional media update and installed it again but i am getting the same problem again

Has your console recently been repaired, or have you upgraded to a new console? If so, then it's a licensing issue.

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Nopes my console was not repaired but it was replaced with a new one a year back, when i returned the RRoDed Xbox and when i was able to play my files offline with the optional media update up to last month, it's only after the recent dashboard update of Oct this problem has surfaced.