The other day, while experimenting with the Music features on the Pre (will post about this in the future), I uploaded some videos to my Pre to see how that went, and I was very pleased with the results. I've taken a look at 3 different Video applications on the Pre: The Video Player, Sprint TV and YouTube (all applications, not web sites).
When I loaded my video onto my Pre, I wasn't sure exactly how or where, so I plugged in my Pre, but it in "USB Drive" mode and copied my videos to the phones "download" folder. When I launched the Video App, it immediately found them. I was able to play an MP4, but it couldn't find the AVI file. The MP4 launches full screen, but you can tap the screen size button to view it to the 4:3 mode the video came in. You can easily pause or advance the video, and the sound and quality seemed quite good.
I then gave the Sprint TV app a spin. This seems very well populated with all sorts of content depending on your interest. There were many free videos/streams to watch, and some premium (fee-based) content as well. Having two young kids, I navigated to the Disney Channel lineup, and started watching Phineas and Ferb. The streaming was surprisingly good - good video and decent audio (not to 'digital' sounding). The only complaint I have is there was no way to pause the video. I know advancing through video is limited to whatever you've streamed at that point, but it I would like to be able pause a video here, or even move around through what has been downloaded to that point.
A good example of this is the YouTube app. This app lets you search or sort through YouTube videos, and view them in pretty good quality. Unlike Sprint TV, you can pause and advance through the timeline of the video. However, this is of course limited to whatever content is on YouTube, not Sprint's more commercial lineup on Sprint TV. One feature I thought was missing here that I have (and love) on my TMobile G1 is the ability to mark a video as a favorite. The closest to this is a history of Videos you've played.
All around though, I give the Video Playback capability of the Pre an A. It does a good job (if you have the right format), and plays video in good quality. I wouldn't count on the battery lasting a long time though... if your on a plane, bring a spare!