Dial-up speed depends on a lot more than your hardware. I have a 56k modem, and when I was on dial-up at my old apartment, I'd get 54k connections. Where I'm living now, 31k was the absolute maximum. Your distance from major relay points and quality of your house/apartment's wiring can greatly affect dial-up speed, as my own experience proves.
The majority (as in, greater than 50%) of internet users in the US still use dial-up and probably will continue to do so for the next few years until cable/DSL companies can get their prices down further and provide service to more rural areas. My mom lives way the hell out in BFE, where if you want the internet you have no other option than dial up - the cable companies don't even have lines for TV out that way.
On topic, the current system works fine. Don't fuck with it. I never watch the AVIs, but I'm going to start doing so once GBA movies start showing up - my old-ass PC can't handle the emulation.
the simplest way to convert these runs to flash would be to do a direct avi>swf encoding. I've done this before with good results. There are some limitations though. A swf can only be 16000 frames long, meaning longer runs would have to be more than one swf file long, but could probably be strung together using a load command. I've already converted SMB successfully, and I was planning to do the same with my future runs. I'd show a demo but I don't have my hosting back just yet.
What about making a "movie player" type thing. It would read the movie formats, and play the video no matter what. In otherwords, covert the rom and movie into a file this player can read, but the rom can't be extracted.
It's probly more coding than it's worth.
As for the Jap games TA's. Those are the hardest ones to watch if you want to. Very few seeds and hard to find anyway.
Nope. You can't make something extractable to only one thing. I suppose you could encrypt it lossy somehow that wouldn't effect the movie, but then it wouldn't be exactly the same (ie it might not be possible to reproduce on a console).
Build a man a fire, warm him for a day,
Set a man on fire, warm him for the rest of his life.
The videos already infringe copyright, but so far no-one seems to care. (Which copyright, you might ask? Music, of course. The music of the games is copyrighted like any other music. Being played by a game console doesn't make it any less copyrighted. Also the question whether the graphics of a game are copyrighted is an interesting one...)
But anyways, the solution which would give best graphical quality (ie. the original non-lossy graphics of the original game) with the smallest possible file size would be to make a specific video codec. The video file would contain all the sprites and tiles of the original game (perhaps packed with zlib or whatever) and the video file would be basically just screen coordinates and timings to show these graphics.
Or course implementing this idea is far from trivial, even though the idea itself is simple. The emulator would have to be modified so that it can output the graphics of the game and their positions at each frame, and the codec itself would have to be programmed, naturally. This is in no way an easy task.