Well, if you're watching something on that small of a screen and probably somewhere in public, the quality doesnt really that matter. At least to me.
I have one of those things form Lik Sang, and it works great. Every once in a while the sound won't be synched up with the video, but that's not a huge deal. Oh, and the fact that quality takes a hit really helps with fitting things on the card because it also reduces filesize. I personally would much rather have another episode of Family Guy on it then to have the other few be of extreme high quality. Plus, if your computer can play it, it will work on the movie player. Doesn't have to be MP4.