When the new iPods were released (the 5.5G ones that is), I wasn't really too fussed about the increased brightness, the new 80gig version or the games - in fact I was more interested in the new software which allowed 640x480 videos to be played on the iPod. Turns out, the software update Apple provided does allow the earlier 5G iPods to play these higher resolution videos. Turns out if you put any 640x480 quicktime file in iTunes and then select 'convert for iPod', then the new video will be 640x480 - and playable on any 5G iPod... Whilst the screen is still only 320x240 - the video out to a TV is much better quality!!
On a mac, this is easy - just load any DivX movie in Quicktime, save as a .mov (doesn't transcode the video), import to iTunes and convert to iPod (does transcode video). Hopefully ffmpegx will support this soon - I believe VisualHub (iSquint's sister product) will export using the 'low complexity profile' required for the latest iPod software.