Turn off animation. It speeds up the experience significantly. Xbox extender uses a modified remote desktop stack, but there is some caching that goes on, but most comes from the server (WMC box).
I find that if you use opendns or the like it really slows down caching of thumbnails and perceived lag. Once I moved to a DNSSEC (unbound) the issues went away. You can use google or operator DNS to get around this, but it doesn't hurt to tinker.
I went crazy examining traces when I first set this up a few years ago.
Also Xbox doesn't like cascaded switches, so only one layer between WMC and Xbox if you can.
