Aside from all the technology, it's crucial to get a solid, professional voice-over that tells a clear story about your product. My personal experience has been that even the best video production can be quickly tarnished by a voice-over that is casual, meandering, or inconsistent. For our demo video, we first sketched out what points we wanted to make in the video, wrote a draft script, then recorded nearly an hour…
Seconding this. Use x264 (or an application that uses it, like ffmpeg) and make yourself an mp4 video that plays in Flash. Having low quality for a product demonstration video simply isn't tolerable--and yet it's amazing how much people tolerate awful quality internet video despite the fact that one doesn't actually need a lot of bandwidth to achieve reasonable quality. JW Player is of course a great tool, and takes…
NB: This comment was made after this thread went dormant. This cross-post is for the benefit of anyone browsing the archives..