This is the first thing I tried...
you have to remux with tsmuxer. you can't keep the original structure with the menu.
Huge downside though, It only works if the folders are in the root of the USB drive(no network) so I don't think you can use this method with more than 1 movie on a drive. Can be handy for long movies that you can't usually FF when in TS container.
even though the folder is really named BDMV, the x700 sees it as an AVCHD structure:

