I used the free FLVPLAYER.swf to play my FLV's inline, the problem of course is the transcoding. Users just want to upload stuff and be done, they don't care, and don't want to bother with saving the site space, or re-encoding their files. For my uploads I used the Riva encoder for mine.
This site does the online conversion, and you DL the output, it would be excellent to get a hold of the technololgy they're using
http://media-convert.com/