However, please note that the N8 has a screen resolution of 640 x 360 pixels. You may be able to play HD resolution videos on the thing, but you sure as heck ain't going to be seeing the higher resolution.
I'm no expert, but I'm fairly certain that the entire decoding process is in fact hardware-assisted. The CPUs in these phones just can't manage the decode fast enough to supply the video data in real time, even for fairly low resolution video, unless perhaps the bitrate is miserably low. (The VLC guys completely gave up trying to port their software-based decoder onto the N900, and I think it was pretty much for that reason.)