Char - It does play them.
I had a bit of a hassle with it too.
This is trying to remember and I could be slightly wrong but you'll have to play to find out:
Right click on the file and choose 'open with' then select WMP and choose 'always use'
It gave me some stupid error then about not suporting it but I told it to play it anyway and it worked fine.
To open it from within WMP, click on file, then open, then I did one of the two following things - cant remember which:
either chose 'show all files' and then opened it
or if it didn't have that option
for the filename I typed in * then hit enter so the filter disappears and it shows all files, I then selected an m2v file and opened it.
It was a bit tricky definitely but once I'd got it set up it worked fine and played them fine. Once I'd got WMP playing them then MC played them too.
Other than that, I used to use PowerDVD which seems to be able to play everything and plays it all extremely smoothly and well. Their playback engine is great.