I found an alternative to TVersity that allows the Chumby to play videos from your computer called PiMPStreamer. The advantage is that allows control over the framerate, reducing video choppiness. The swf player that comes with it didn't resize correctly on the Chumby so I had to reverse-engineer the "protocol" and create an alternate player that can be run from a USB thumbdrive or similar.

It's pretty simple, but allows me to get quite usable video on the Chumby from mpeg4/mpeg2 videos I've encoded using my computer's TV tuner card. For me, reasonable starting settings were 600 for movie, 96 for audio, and Framerate/2.

Program: http://www.pimpware.org/PiMPStreamerSetup-1.0.msi

Files to be placed at the root directory of your thumb drive:
Modified SWF client: http://cyphergate.com/pimp_streamer/pimpflv.swf
Example XML file: http://cyphergate.com/pimp_streamer/profile.xml

You'll need to open the profile.xml file with a text editor and change 192.168.1.145 to the IP address of the computer running the PiMPStreamer application.

I'm not quite sure if audio-only (eg. .mp3) will work or not as I generally would use SqueezeCenter/SlimServer for music, but video is definitely working great for me and this method seems to be less finicky about codecs when compared to TVersity. PM me if you'd like to take a look at the .fla source.