I think you're right Andrew - this is the reply I just got back from Koolu:
The Koolu unit is able to output up to 1920x1440 as an analog VGA signal. For video and performance purposes, we recommend the video be 720x480 and in MPEG-4 format.
With respect to supporting the menus, it should support them with alpha blending provided two things:
1. The colour mode used is 32-bit
2. The menus do not require any 3-D acceleration (the AMD Geode only has 2-D acceleration)
As such, the menu will work, but performance may not be as quick (ie: changing menus) as on a regular desktop.