Transcoding to 1080p if the coded resolution exceeds 2840x2160 is indeed expected behaviour. The video decoder on the Xbox cannot handle resolutions higher than that and will fail to start playing (and previously crashed the decoder and then app).
Transcoding to a lower resolution in these situations is unfortunately the only solution, but making sure the content is encoded with a resolution not exceeding 2840x2160 can help you to avoid these transcodes.
However if you’re seeing optimized content that is still encoded at that resolution then that is something we should look into. I’ll file an issue for that.
