I love watching movies on my PSP, and as Snaake says full resolution too.
I still buy the UMDs, and the memory sticks have dropped, but I run a dedicated server for the PSP, and it all streams to it.
IR Shell allows me to play games and movies direct from my server and from any outside link.
PSP Player is a cool player which allows playback for a multitude of formats.
I don't know if you can accomplish all that on the DS.