I have a solution! Thanks to
a post on the Verizon forum, I've found what it takes to play videos on the Touch.
It's kind of weird because the max allowed video size is different than the actual screen size, and sometimes the phone inisists on stretching to fill the screen, but it works.
Details:
* The Touch screen size is 400x240.
* Max video size it will accept is QVGA, or 320x240. Notice that is smaller than the actual screen!
* Must use MPEG-4, NOT h.264. If using Handbrake, that's under the "Video" tab.
* Assuming you use Handbrake 0.9.4, set it to about 90-93% quality with the "constant quality" setting on the "Video" tab. That seems to work well and it produces much smaller files than a constant bitrate. The Chocolate can handle up to about 700Kbps video bitrate; 1000Kbps is too fast and will be jerky.
* In Handbrake, set the desired output size in the "Size" fields -- see the attached image. Check "Keep Aspect Ratio" or it is likely to squish your images with the wrong aspect ratio.
* For 4:3 video you can set the Size to 320x240 and it will work perfectly. The Touch centers the image in the screen with "pillarboxes," just like it should.
* For widescreen video it's not quite so nice. E.g. for 16:9 the correct size is 320x180. Handbrake actually changes that to 320x176 so the macroblocks work out to a multiple of 16 pixels, but that's OK. But then the phone insists on stretching the image to the largest possible size -- which is 400x236. (Remember, it will only play video up to 320x240, but the display is 400x240.) So you end up with a larger image, but it's not quite as clean as if the phone didn't stretch it. But it works and the larger image is easier to see.
Then you just pop a microSD card into your phone, hook up the USB, go to Tools -> USB Mass Storage, and the microSD card will appear on your PC. Copy your new video file into the my_flix folder and you are ready to watch your videos!
Gary