I think time is better spent on reporting performance issues, profiling and improving the current gstreamer setup. There are already dsp accelerated mpeg4, h264 base profile, divx, wmv, h263 gstreamer elements on the n900 and I believe at least the h264 one could be made faster and that we'll see 720p files play without much of a sweat. Also with the qos handling in gstreamer it is possible to make the codecs not decode fully and just have macroblocks with same pixel colour when the load is too high and so not skip.

The scaling down is done by the gpu so is not really a cpu drain. however of course working on 720p frames means more memory access etc.