just run it and it work.
root
cd /home/user/MyDocs/panplayer-b4/
mplayer yourvideo and it works.
Do you have mplayer installed? If so, just running "mplayer filename" may use the mplayer and not this new "panplayer" which is also named "mplayer" for the executable. The fact that you cannot play files larger than 864x648 seems to suggest that you are running the "usual" mplayer that we always had on the N900 and not the new one Reffyyyy posted.
I've tried running this panplayer using the mplayer.sh script file it comes with and it always complains about the missing packages that Reffyyyy mentions.