I think you guys have done a great job to get this project to such an advanced stage. Well done and thankyou.
Regarding the Wii specifically, i think that it’s not possible to succeed. The Wii seems to be a limiting factor in playing back video. Your choices seem to be Quality or Smoothness.
I messed with the settings a fair bit to find the ‘perfect’ config where the quality is at maximum and there was little or no jump/skip.
I went so far as to order a LAN adaptor to try and eliminate the wireless card as a limiting factor.
In the end, it seems that there is something about the Wii that limits the quality. Maybe it’s the processor, or maybe the RAM, maybe it’s a flash thing. Either way it seems that this isn’t going to work out on the Wii.