I have a few years back Rpi1, and as far as I remember, I think that it was capable to play 720p x264 content from USB disc quite without problem - after buying VC-1 license.
Just to clarify no licence is required for playing H.264 (the codec used by the x264 encoder).
You may need the VC-1 licence for playing VC-1 files (not widely used, but most commonly found on some BluRay disks).
Pi 1 will be fine for 720p H.264. You shouldn't have a problem with 1080p files either (as long as network is good).
Obviously a Pi 2 or Pi 3 will give a more resposive experience as the processors are significantly faster.