Video formats frequently allow specifying non-square pixels; for instance NTSC DVDs at 720x480 may have either "tall" pixels (for classic 4:3 screen) or "wide" pixels (for a 16:9 widescreen picture).
Currently we don't take this into account and assume pixels will be square; as a result, a video with non-square pixels will appear displayed squished or stretched.
The raw pixel size should probably be scaled to a "display" pixel size; thumbnails can be generated at that size and the player widgets can be stretched at that aspect ratio.
(QuickTime appears to properly scale the picture to its proper aspect ratio within the plugin window, but Cortado just stretches the video to fit whatever size you specified. Haven't tested Firefox 3.1 video element yet.)
I've made a 720x480 widescreen version of the fundraising PSA video, which I'll upload somewhere shortly as an example.
Version: unspecified
Severity: normal
URL: http://commons.wikimedia.org/wiki/File:Aljazeeraasset-GAZAATTACKD29128D540.ogv