The iphone will soon get CorePlayer, which is an excellent mediaplayer for Palm and WindowsMedia devices taht can play many popular formats with no need to transcode (divx, mp4, h.264, in avi, mkv, etc), not to mention it has native support to the itunes media library which has a huge userbase.

My Treo (650 and 680) can play video MUCH better with coreplayer than my n800 with mplayer even though the Treo has lower hardware spec. Higher res, higher bitrate files plays smoothly on the Treo while my n800 freezes and stutters. Judging by the even higher powered CPU and hw accelerated gfx of the iphone (and some early demos on youtube, search "coreplayer iphone") it seems the iphone is going to be an even better than Palm\WM devices for playing video files on the go.