I don't think you're going to have great luck with a single 1.6GHz G5. Try making sure your Energy Saver settings are set to "Better Performance" and give it a go. Also keep in mind that the codec used to encode the video makes a difference. H.264 takes more horsepower to decode than other codecs, for instance.

Changing caps probably won't help you at all.

Peace,
Drew
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Power to the PowerPC!