This is my iPod Nano 1G 2GB running iPodLinux and MV Player 2. With that player, you can play (converted,) COMPRESSED VIDEOS! As you can see, this is For The Birds, by Pixar. As you might know you can play uncompressed videos in podzilla, but this tool spares you much space. HERE IS THE EASIEST GUIDE TO INSTALL IPODLINUX. THIS WORKS MUUUUUUCCCCHHH BETTER THAN THE OFFICIAL INSTALLER!!
To install iPodLinux you just have to go to miche.aqua-gero.com, choose your destination and follow the instructions.
To install MV Player 2, follow the instructions from this page.