MMS video is important because HD video may or may not be supported on a certain handset - namely older Blackberries (OS5 and some OS6 devices) and low-spec/mid-ranged Android devices (older iPhones probably escape this due to the long support cycle/OS updates). It's the only video format you can be 100% sure pretty much any cell phone with a screen supports, from dumb and feature phones to super phones.
There are still a ton of people out there with dumb/feature phones, and low spec devices are very widespread due to the low cost. A lot of people use PayGo carriers like Boost and Virgin as well, which are filled with lower-spec devices.
WP7 has no issues viewing Video MMS. The issue is that it cannot send them.
What type of video your phone records has absolutely nothing to do with sending video MMS, because the phone will always compress and resize the video before sending it, anyways, the same way it does for picture messages.
If someone has a smartphone or a Tablet/Netbook/Notebook then this is less of an issue because there are ways to share the media (though video is rather hard to share on WP7 without uploading it to a Social Network, which I tend to not like to do I lock all my accounts down and my settings default to "Me Only" on all of them).
When Microsoft allows FS access for 3rd party applications, I think this will cease to be an issue. It's a real issue now because even if you use a service like Box.net you still can't upload the video because none of the file upload dialogs in i.e. Mobile IE actually work... And you're stuck with IE if they're no app for the service (unless you develop your own, there is an API for that
).
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