Did some testing, used my digital camera to record some videos and then played them on my Wii.
They play flawlessly from my 32mb SD card. Both the 640x480 .mov as well as the 320x240 .mov.
That seems to be the intent of playing videos through the photo channel. It was geared towards amateurs and their cameras to play back on their Wii.
As long as you're not trying to convert a video file that uses a motion compensation type compression directly to the Quicktime format, it should technically work.
If the video file's compression does motion compensate, you're gonna need to convert each video frame into a sequence of JPEGs. After that, package it up as a Quicktime movie and it should play in the Photo Channel. Expect exponentially larger file sizes than the source video.