I looked into this since it wasn't high on Mikkel's list of enhancements. Unfortunately, MythVideo is considered a front-end app. This means that the content in your videos folder can't be streamed throught the Myth protocol.
The way around it is to query the database directly for the path to a video, then play it over a share (i.e. Samba).
There is a separate code branch in SVN that contains my mods for the database query portion, but I never got around to working out the file share stuff. Unfortunately, I work full time and have been working on a Master's so I haven't had a chance to revisit it in a while. Hopefully when this semester ends (April).
If anyone wants to try to pick up where I left off, I can help you get started. On top of the things that are needed to compile Mikkel's base code, you need to add in some MySQL/C++ libraries.