> the Thusnelda encoder is becoming competitive with H.264
The encoder is getting quite a lot better but to say competitive with H264 is doing everyone a disservice. H264 on the codec level has much more tools and much newer techniques than are allowed by the Theora spec. Given equal quality of implementation the H264 encoder will always be better. Furthermore the existing Theora encoder has been very poor and is only now getting up to speed.
Its great to see and I would really like to support the codec with what I do but in terms of encoding the conversation is about "good enough" or not. H264 is out of reach ...
As for picture quality demands... I hope the demand for high quality is increasing as the playback moves from the "office/bedroom" into the living room.