I really don't know what all you guys are smoking
I've been watching vanilla (not recompressed) films and series downloaded of torrent since day 1 on my N810.

All videos I've tried are already in a format suitable for playing on the NIT with just the occasional hiccup in some fast motion scenes. I guess I don't watch action flicks really that often on the tablet, but I've really been impressed at the video playback using mplayer. Largest format I've tried to watch is 624x352, and that's about the standard for widescreen standard definition movies.

Maybe the speed of the SD card, or using something other then mplayer for watching is what's limiting video playback. I remember trying to watch these videos in Canola, and getting very choppy playback...