Hello,
Yes Alfresco can manage large video documents. With the default repository implementation, files are stored on the filesystem and meta-data in the database which is ideal for large files (as you don't want them in the database.)
We have tested streaming video from alfresco using some .asf files. I have also tested large >256MB .mp3 files with no problems.
Content is served from Alfresco web-client using a servlet. The servlet streams the file source from Alfresco into the output stream for the web-client. The stream will be opened by whatever application is registered on the system for the mimetype e.g. Word for .doc or WinAmp for .mp3
So flash/avi etc. will be opened by whatever application is appropriate for the filetype of the content.
There is not a way to configure a viewing page for a type within Alfresco web-client at present as we use the DownloadContentServlet and allow the system to open the appropriate client app as discussed above. However, using the templating system in Alfresco it would be possible to create a HTML page template that contained say an embedded Flash player with the URL to the content as part of the template page. This template page could be accessed by URL also.
Hope this helps,
Kevin