I finally installed the latest firmware to N800 a few days ago. Video Playback had been improved immensely for that release. Kudos to the Nokia team for making it happen. It's spendid!
Sadly, I noticed that video stretching no longer worked in the same manner as it used to work in the previous firmware and most of the videos encoded with Media Converter no longer worked on the new one. But this was nicely balanced by the fact that I noticed that resolution of 640x384 worked in the new firmware. While testing it later, I found that balance of roughly 14 fps on that resolution was pretty much perfect between frame drops and normal smooth playback. Thus - a new MC release.
I also settled on 768 kbps to be the best default (anyone care to comment on this), as the idea of using such a high resolution means you want a good image quality - and that can't be had on low bit rate.
For demonstrative purposes, I give you the following in 640x368 for N800:
30 sec clip from Oceans 13.
30 sec clip from Sunshine.
They are made on the optimized mode, thus the cropping. Optimized mode just looks so much better on N800 than the movie aspect 2.39.
Download here for:
I Accidentally released first a version that didn't have the fps set correctly. Thus the latest version is 1.41 in garage.