If I setup a Channels DVR can I set it to record, wait a minute, then start watching the recording live and have it play out a MP4 version?
What I want to avoid is the high bandwidth MPEG-2 stream so that HD is actually watchable over WiFi.
Sure you can do that. You would change the Home Streaming Quality in the Channels app to 720p @ 4mbps or whatever you want, then hit play on the episode being recorded.
Or you can just hit play on a channel after changing the quality setting, and it will be converted from mpeg2 to h264 while you watch live TV.