Will work with iPod Classic! Just needs a tweak...
There's an answer... downgrade the firmware on your iPod of version 1.0.2. For some inexplicable reason, at that level (not higher or lower), my iPod 160GB Classic plays movies without issue on the Philips. Regarding how to downgrade your firmware, it's explained at various other sites but in short you replace the two Software Update files in the iTunes directory, disconnect from the internet (to prevent iTunes from automatically downloading the newest version) and then restore your iPod. Once you've got 1.0.2 installed, re-synch and it'll work like a charm!