Hmm, in the latest version of iTunes, you can drag a video file (.mov and .mpg, at least — not sure what else) from the Finder into iTunes and throw it into a playlist. You can then watch it in the main window, in a separate window, or in fullscreen (I can't even do that in Quicktime!). Interesting.
so what you're saying is that I can now watch porno on itunes..... And here I was all along thinking that itunes was perfect and couldnt possibly be improved.