It works fine for me, but you need to make sure that you've enabled sharing with the Xbox 360 and also that when you select your computer from the list, you select the item with the Zune logo on it. Also, it seems that you have to give either the 360 or Zune software a couple minutes after adding content (like saving a Smart DJ playlist) before you can stream it. My 360 will see some songs, but not give them a length, and so it won't play them. I don't know if the Zune software has to approve them in the library for streaming (perhaps marking them with some sort of DRM signature), but you have to give it a couple minutes (which is pretty frustrating, admittedly).
Download some songs, go make some coffee, turn on your 360 and give it a whirl.