The issue, unfortunately, is a complicated one. The LCD controller is (primarily) what limits us from the high-quality frame-decoding that the rest hardware might be able to hand. The OMAP core actually has both an IVA video decoder and a PowerVR OpenGL chip which could prove useful for the purpose of video decoding (mostly the IVA), but, by negligence or by necessity (possibly relating to the LCD controller), we do not have drivers for them from Nokia.

So, could the N800 get better in the future? My guess is yes (though there may be limits that I am unaware of or under-accounting for, Serge is much better qualified than anybody else on these boards to comment), Nokia could certainly surprise with drivers in a future update (as seems likely from whispers around the water-cooler). How soon that will be (if ever ), who can say?

Personally, I would wait for the next device in the NIT lineup (probably the N900; and probably not much further away than mid-summer 2008, though, I have no hard facts here other than inference from previous release trends) which will almost certainly feature an OMAP 3000-series core and be capable of playing back much larger and higher-quality video files.

Based on the hardware and software available right now, it works about as well as is humanly possible.