Thanks for the reply Jedi!
Possibly I misunderstand the use or meaning of "locally hosted". What I envisioned was that user would be able to upload/attach video content and AME would present that in the post with an embedded player. I've made a little test post at my forum with an .wmv and .mp3 attachment, see
http://www.greenpowertalk.org/showthread.php?t=5039, both attachments are showing as regular attachments, no embedded player(s). Besides the local stuff, AME works like a charm.
-RoB-