Well, the good news is I've got basic VFW/AVIFile playback working (meaning, streaming an AVI file through as a texture to OpenGL). Video only at the moment - no audio - but that's OK, I'm sure audio won't be too difficult.
There's a screenshot up of an AVI playing in it (not that you can tell much from it, but hey); specifically, a Cowboy Bebop DivX. Framerate in a 640x480 window fluctuated between 25FPS - 80FPS depending on how much was happening on screen - bearing in mind my PC isn't a real beast, I'm happy enough with that.
The BAD point is that - as we've all encountered before - TrueMotion don't have a VFW codec. So using VFW you can't access the FF7 movies. This suxors. The only way to access codecs like that is through DirectShow. So why don't I do that...? Not optimal in more than one way. Firstly ... have you SEEN the DirectShow API? The header file for DirectShow 8.1 is 1MB!? solid of source code. This is ridiculous, even accounting for the fact it must contain a lot of helper classes. Also, persuading DirectShow and OpenGL to cooperate would be "rather funky", as my uni would describe it (translation: too hard, give up and hope someone else does it).
So for the moment anyway, I'm sticking with VFW support which means the engine will playback any AVI using a standard VFW codec. This includes DivX's obviously, plus most other codecs except TrueMotion...