The Metavid blog has a post about the HTML 5 Video element and how it can be supported in browsers that don't have native support for <video>.
mv_embed, is included in a page it goes through the DOM and replaces all <video> elements with whatever playback method the client browser supports. If it supports HTML 5 <video> then it does nothing.
I'm making good progress on the Firefox implementation of native Ogg Theora playback. Today I got audio working by decoding the Vorbis stream within the video and using the portaudio library to control the sound hardware. I had multiple videos playing on a single page, each with sound, mixing well.