Working it into the backend (i.e. mplayer.py) would be quite easy. In fact, I doubt any changes would be necessary at all. The playlist (i.e. playlist.py) would be equally straightforward.

The frontend might be a different matter. For example, I'm not sure how copy and paste would work using pygame. And Kagu currently has no virtual keyboard. (the maemo virtual keyboard works with GTK, not pygame)

Doing a quick google search, there's pygame.scrap for clipboard integration, but that's only in pygame >=1.8, and I think maemo uses 1.6 or 1.7 currently.

Anyway, I'm sure it could be done. It's just a matter of finding a good way to paste text into Kagu's UI. Possibly a GTK popup window? Dunno...