Hitting the Linux kernel recently and Mesa/Gallium3D was Nouveau's support for the VP2 video engine to provide H.264 and MPEG2 video decoding for supported NVIDIA GPUs. After further exploration by Ilia Mirkin, it turns out the interfaces for the newer VP3 and VP4 engines are similar and thus can be implemented without too much work. The support has also been there for the NVC0 "Fermi" support and can be extended to slightly older NV50 GPUs.
The new VP3/VP4 video decode acceleration support can be found in the form of ten patches currently sitting on the Nouveau mailing list. There are some limitations (bugs) to this work right now and H.264 / MPEG-4 isn't working at the moment, but the Nouveau developers are certainly making progress on NVIDIA hardware-based video decode support.