Some gotchas with video in this release:
 
--It requires Windows Media Player 10 be installed on the machine.
--It only plays .wma and .wmv files.
--It requires the latest video drivers for most video cards. (For sure on ATI Radeon 9600/9700, which is what I have.)
 
Here's a simple file you can put into XAMLPad to see it working:
 
<Grid xmlns="http://schemas.microsoft.com/winfx/avalon/2005" >
   <MediaElement Name="myVideo" Source="C:\WINDOWS\system32\oobe\images\intro.wmv" Stretch="Fill" />
</Grid>