Sorry, but this doesn't solve anything. All my videos continue to sync after 2.0. I'm sure, because I kept deleting various ones and re-syncing to test that it was really happening. Or, I'd delete it from itunes, then sync the ipod. The video would be gone from all locations. Then I'd make a new coding of the movie with iSquint, add it to iTunes, and Sync. And it would end up on the iPod, and it would continue not to play, just as before.
I think the problem is that there are a couple separate problems here. Some people may be having a problem getting movies to sync after 2.0. Maybe because they're used to the functionality you mention. However, the majority of us are unable to PLAY videos that are undeniably on our devices. Hence, the subject of this discussion, stemming from the error message we get, "This movie format is not supported". We can get the movies on our ipods fine, we just can't view stuff that used to work fine.
By the way, I concur with those who have pointed out that the videos play fine in iTunes, just not on the iPod.