I wanted to chime in and say I have the exact same issue, however I am using the Widescreen "Patch": http://www.lucasforums.com/showthread.php?t=202242
. My resolution is 1680 x 1050.
With KOTOR 1, the movies would play, albeit a little blown up so they looked pixelated, at my native resolution. With KOTOR 2, they're a little box, even with the high-quality versions. Windowed mode plays the movies big, fullscreen does not.
I've messed about with the .ini a bit, and nothing seems to take hold. Google so far has given me zip, aside from learning others have the same issue. ; )