It requires a quick installation of the iPodlinux firmware which, as far as I know, modifies the original Apple firmware to allow dual-booting of the two.
Videos are converted to decompressed .avi files as the previous iPods can't decode compressed video files with their processors.
The quality is quite surprising but the battery life suffers as it is used and it can go out of sync. Also, the last time I used it, a single video file could only play for around 15 minutes but they were working on it at that time and may have it fixed.