It looks like Pioneer did manage to sneak a few feature updates into the firmware fix they release this week.
When connecting my 3G iPhone this morning, I found that the video menu was available when on the iPod screen. Selecting a video brought up the standard video playback screen, along with the controls and the audio from the movie. I was never able to actually get video to play, but that may have been limited to the single video I tried to watch.
I would hazard a guess that iPod Classics will not output video as well, but someone else will need to confirm that.