by the MD's CPU. The core merely serves the files.
A gigabit LAN could probably let the Core serve cheap MDs with decoded streams, maybe encoded with something really lightweight like HuffYUV (~60% as big). ffmpeg and MPlayer support HuffYUV, even a 2:1 YV12 version. The Core would have to be faster to accommodate. There's got to be a way to harness multiple videocards on the core without just using VNC, because that has no sound and has extra overhead for all the other VNC features - and the VNC client isn't really that lightweight.
This doesn't make a lot of sense to me. Why would you want to put all the graphics hardware in the core? You can get a good selection of fanless graphics cards so I have no problem having one in my living room.
BTW there is no way to decode H.264 in linux using current display hardware.
Even a massively beefy MD cannot decode H.264 1080 content in realtime. Asking the core to do this for multiple MDs is not really going to be possible.
Chris