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PearlJam said:

And very badly I might add. I can take the source PS3 videos and compress them into videos that look/sound much better than the 360 videos and still take up less space. All with amateur tools that anyone can download.

There was also some left-over space on Discs 1-2, only the third disc was full (mostly). With a little more time they could have made some improvements.

But how much space was left over?  Remember that MS reserves ~ 1GB of each disc for security reasons.  So they really on have about 7 GBs to work with.