I had similar situation back a few moments ago. Here is my solution:

N770 is a toy. At the present time Mplayer hasn't got enough power to decode Divx fluelty, unlsess the reso is 320x240x25fps or so.

It seems to be quite foolish to recode the movies you want to watch with this offline. But you can do what you wish.

WiFi LAN is the keyword now.

I tried to connect to my Windows Workgroup with CIFS.ko kernel module and it did work: I saw all the shares on my XP I wanted and Mplayer could stream those also. Movies and MP3 files did not work like they should. all content stuttered and was not usable.

More propper way is to install Nokia's media stremer on the device and then install Twonky, TVersity, Nero 7 MediaHome or other UPnp AV server on some XP and let that solutuion deliver and transcode the videos/mp3 so that the devivce can utilize them propperly.