I'd be happy if it could playback 1280x720p HD movies.
The 1,6Ghz was reported to only playback 720x480p,but the 1,3Ghz might have issues with this type of video.
It's a pretty good resolution for a screen,which is the least sony can do when seeing it's exaggerated pricetag for a (cheap) Atom based mininotebook/MID/whatever ultra small internet device this is.
I'm much more for 16/9 though. 1280x720 would probably be enough for most 'toys' like these, and would save on some cost.
Pitty they didn't go for the LED controller; but chose the old 'joystick' type of mouse instead.
"It's not often, then, to hear the designer ... speak out on his inspirations and thought for a product." Take a look at http://www.sony.net/Fun/design/activity/product/index.html. About video playback, some Japanese reviews seem to indicate that it depends on the software you're using.