RAM size isn't an issue for 720p. RAM speed is more important.

And no, N8 doesn't decode h264 on ARM11.

There's a reason the only 720p codecs for this particular SOC cost alot of money: it's bloody hard to do, and your efforts are mostly wasted anyway because you can't reuse it for anything else. That's why you'd only do it if you're both crazy, one in a billion genius, and getting paid sacks of money.