Guest additions is what enables the drag and drop feature. So its probably not compatible with Catalina. You could try downloading the latest version and reinstalling it to see if that helps. Remember to restart after installing it.
Hey I have a x5660 as well ! Actually 2 of them in a dual socket mobo.
1080p is FINE as I said, but my dual x5660 can BARELY handle a 4k file. Thats why I said if you use 4k dont rely on cpu power. If you only care for 1080p no probem! .
BUT Its SUPER not efficient and the i7 that OP has does not have h.265 decode on the cpu for most 4k.
Also didnt know hw transcode was a plex pass feature. I bought plex pass a long time ago so I didnt notice, good point !.
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