^Here's the way that I was able to easily do it a few minutes ago. There could be better ways, but this was the one I figured out on my own. Also, I have nomute installed, and when switch is on mute/lock, XBMC won't play audio. Not a big deal since it seems it can only play horizontally(the only way I'd use it anyway).
1) Create a folder in var/mobile. I called mine Videos. I used iPhone Explorer to create the folder and drop files into here.
2) In XBMC, I went to Videos, then clicked add source. Afterwards, click browse. If you select or click "Home folder" it shows that it's the var/mobile directory. Go find your folder and click OK. Label your source, then click OK again.
Your videos should show up and play just as well as on your computer.
I've uploaded two 720p MKV files onto my iPad this way, and I've had interesting results. The first file was 300ish MB file of Fullmetal Alchemist Brotherhood. The file played beautifully and lag free, HOWEVER subs didn't show up. Second, XBMC crashed about a couple minutes into the video after I tried to play with the sub options. After opening the app again and fast forwarding to find my same place in the video it crashed again. I'm new to XBMC, so I'm sure I just don't know what I'm doing and it can be figured out.
EDIT/ Apparently XBMC doesn't support these types of subs. It requires you to have a separate file for it in the same directory. /EDIT
I also uploaded the season finale of Doctor Who Season 5, and it played for several minutes without crashing. I also fast forwarded it without crashing. It's still playing right now and looks amazing. It's way better than the sorry lower res AVI files I've been watching via Cinexplayer. I'll also try uploading some other anime and try my luck.
All in all, I think this is pretty cool. I'm gonna visit my mom this weekend install it on her ATV2 and see if I can figure out how to get it to play nice with her MBP or my sister's iMac.