Everything you want to know about what the default player web part can and can not

http://blogs.msdn.com/b/sanjaynarang/archive/2010/05/26/media-web-part-in-sharepoint-2010-faq.aspx

2. What file formats are supported or can be played in Media Web Part?

Media Web Part is a Silverlight control. So, all the formats supported by Silverlight can be played using MWP. Look at this article for details on that: Supported Media Formats, Protocols, and Log Fields.

There must be consideration about the size of files you wish to support the web application (default 50MB) level and whether to bring BLOB Storage in use if you want to support large files.

Just turn up at web application level should be done with caution – since (at least in MOSS) to max file size effectively means that for every upload steals the RAM corresponding max size while uploading runs. That means if you turn up to the max file size of 1 GB and two users upload at the same time so grab SharePoint 2x1GB RAM on the server (if they sit at the same WFE) while uploading runs – this could potentially send the farm to its knees.