I have two Moodle 1.9.x courses to share with you that can show you Moodle's capabilities with video.
To access them, use the
1. Movie Editing course with Movie Maker
What's "special" about this course is that it shows your Youtube videos and offline-local-hard-disk videos on the same page. You can see an example here. This is my novelty which allows the instructor to store the local videos in the c:\videos folder of a PC. This means that for a low-bandwidth connection, the student can access Moodle and then access the local hard-disk video without any lag time.
Of course it isn't a portable solution if the users are Mac or Linux users. But this works for me and my students in the computer lab which is a more controlled environment.
2. Using the Thirdparty Media Player mod
Click here to see the use of the Media Play on my Intensive English site. Go ahead, have a poke around.
This mod allows you to create highly-customisable play lists.
3. A combination of Moodle quiz and Xerte
My piece-de-resistance (my invention, shared with the world). With Moodle and Xerte code, you can create an page where students can view a Moodle quiz and video on the same screen. The video window can dynamically resize and retain its aspect ratio. Read more here and here.
I'd like to end with a few more thoughts. Firstly, when dealing with video intensive data, one issue that crops up is video file size. Well, I use Virtualdub, Klite codec and the Xvid codec to reduce original video files by up to 10x in size before I upload the video files to Youtube or Blip.tv. So, definitely something to consider here since server harddisk space can quickly fill up with raw video data files.
Secondly, in my humble opinion, the best commercial screen capture software in the market is Camtasia. This software can create SCORM files that contain the video output of a screen video capture session. Ideal for teaching online classes where students can follow what they see on-screen, e.g., when teaching Microsoft Office. So Moodle supports SCORM and there you go - another nice fit there.
Is Moode a good platform for video? Well in my humble opinion, it ain't Vimeo or Youtube, but it's a great scaffolding platform for you to embed any type of video files or external video hosting websites. I don't know what are your expectations, but I can say that Moodle has pretty darn well served my teaching needs where video is concerned.