Microsoft has gotten back to me about the Zune 2.0 devices' video compatibility, which is considerably better than was (and is) the case with the original Zune unit.
Here's the story: Like the iPod classic, the new Zune 4, 8, and 80 support H.264, MPEG-4, and WMV formats up to 640 x 480 natively. This means you can load a 640 x 480 (or whatever) H.264 movie on to the Zune and it won't have to transcode it to a 320 x [whatever] format, as was (and is) the case with the Zune 30. This is great news. On the device's screen, video will be scaled down to QVGA (320 x 240) as you'd expect, and if you use TV Out, you get full fidelity. Excellent.
The only issue is the Zune 30. Because of the different ARM hardware in the original unit, it cannot use video higher than 320 x 240 resolution. So any video you sync with that device, even in the Zune 2.0 time frame, will need to be transcoded down to that resolution.
