He means that currently there is no way to do this, but there might be in the future if you give it time. Although, I'm not sure it is possible, since the way the replays are recorded might be in a rendered graphical format, only readable by the Wii, and not in a video format. I could be wrong, but I think that is how it works.
I don't have Brawl yet, so I can't test it, but VLC media player can handle just about any format out there (Disclaimer: "just about") http://videolan.org
The replays arent really saved as a video. You can pause it and change the angle,zoom in and out, etc. Id imagine it would be pretty difficult to change that into a video format.
Indeed. The replay is saved as a in game thing. As in it just records the move you make, etc. Then the game use that and re-render it, allowing you to pause, etc. That's why the file is so small, I don't know why they limit it to just 3 minute : /