Doesn't work, the new iPad will not play videos with a resolution higher than 1920x1080, no matter how you get them on it.
I took a 4K video and tried shrinking and cropping it into all sorts of resolutions with Handbrake, and 1080p was the maximum it would play in the built in Videos App and also in VLC.
Unless someone creates an app that incorporates its very own video playing functionality (currently they all still use iOS's player shell, probably because it's the most efficient way) anything over 1080p is a no go.
Ah right, I see. Have you double tapped to zoom in? Which stretches the height of the video to 1536... that'll be ridiculously clear if you're watching 1080p or higher content.We've done tests with resolution overlays and the iPad definitely isn't downscaling. Putting your nose to the screen you can tell 2048 is sharper than 1920 as well.
Here is a 2048 resolution chart my buddy did: https://s3.amazonaws.com/My-Online-Videos/h264-2048x1536-iPad3-Test.mp4
Haha that's awesome...Here is my latest test...just seeing how much of the vertical we can fill before it becomes too much. This is 2048x1280: http://dl.dropbox.com/u/5673574/retina-8x5.mov
Looks pretty amazing! Double tapping to zoom in does work.