In this work we describe how we extended the functionality of our previously introduced application and network aware proxy system with transcoding capabilities. Based on their compound awareness, our proxies devise a strategy for every connected client that intelligently distributes the client?s available bandwidth over the different application data streams. The proxies subsequently put each computed bandwidth allocation strategy into effect by managing and transcoding data streams inside the network before they reach the client. We also present results from the integration of our work into an existing Networked Virtual Environment. These results clearly indicate that our intelligent proxy, enhanced with its novel transcoding functionality, can increase the user Quality of Experience considerably in networked applications.