>>>Flash's new InVu2 is really cool.<<<
i have never heard of "invu2", and there are no links in google for it... perhaps you spelled it wrong?
>>>We are developing a desktop application (a player) to display educational content that is pulled from the web.<<<
does that mean that you'll be playing back video content that was created by other people? or will you be re-encoding it?
the video server that you use will also be a big consideration... i think that the flash video server software costs thousands of $$$? but the windows media server is included for free with most versions of the win2003 server o.s., and you can rent servers with that o.s. for not much money at all.
with a win2003 server you also get the best drm in the business, and the windows media server software can be tweaked for all kinds of delivery options.
the downside to using wmv is that macs don't always play well with it, and since firefox does not do activex, there will be problems there... however, there is a page on the aol in2tv site where you can install free software to make your firefox browser wmv-compatible.