I've tried it a few times watching it from YouTube uploads or some streaming site.
Not my preference. My eyes get watery and I get sleepy. I can't even watch entire movies on my PSP with its 4.3 inch screen. Always my TV for movies with sometimes using my 5-year old laptop even if the resolution is poorer to the actual movie quality.
But I do have TV shows on my iPhone. I can tolerate 20 min shows much better. I have Family Guy Seasons 4-7 (70+ eps) and the entire 13 episodes of the Lucy & Desi Comedy Hour which runs at 50 min I downloaded from YouTube. For me to keep a video that takes up the most space, it needs to have great replay value. If I only plan to watch it once, I never keep it. That's why I don't have any movies on my iPhone anymore. Too long, takes up too much space, and won't view it that often. My iPhone is mostly filled with some of my favorite YouTube videos that run no longer than 3-5 minutes.