Step 5: MeGUI: Audio Encoding Options
Now it's time to set up the audio encoding options. If you've followed this guide for DVD conversion, then the demuxed audio track we selected in the D2V Creator should already be loaded in (if not, load in the .ac3 file that was created). If you are not converting from a DVD source, then you can either load in a separate audio file or if you edited the AviSynth script (set "audio=true"), then load in the AVS file into the "Audio Input" section (meaning both video and audio inputs are the same AVS file). If you want more than one audio track, right click on this audio aread and select "New Track". If you changed your mind about including an audio track, click on the "X" button to remove the audio from being included.
Now we select an audio codec to use. The Xbox 360 supports AAC LC (low complexity), 2 channel audio only. Select one of the "Nero AAC" profiles, such as "NDAAC-LC-96Kbps" as the "Encoder settings" option. Just like the video profiles, you can click on "Config" to edit the profile or create your own - as long as you ensure the "AAC-Profile" is set to "AAC-LC", and "Output Channels" is set to stereo, it should all work with the Xbox 360. The only setting you might want to change is the bitrate (96 Kbps should be enough for most encodings, 128 Kbps gives you near CD quality audio, and anything else above that, like 192 Kbps, is a bit of an overkill).
For more information on AAC audio options, please refer to this MeWiki page
or this Wikipedia entry