Ok, I created this sample file by tearing some code out of a larger project. Its a little light on comments and the code could be cleaned up a lot but it works fairly well. This example uses stageVideo with a fallback to a regular netstream video object. It is based loosely on several sample stageVideo source that I found online.
When you tap on the play button in the example it first loads in a custom player container, then it converts the entire stage to a bitmap and masks this bitmap using a mask bitmap that is created from the library. This mask creates a hole through the bitmap version of the stage contents so that the stageVideo is visible. (Because stageVideo is always drawn under everything in the displaylist.)
This example also has an iOS styled player UI that I created so that it would look similar to the native video player. It has play, pause, a video scrubber and full screen mode. There is a small sample h.264 video included in the example so you can test it out and see it work. On the iPad make sure that your videos are in a folder or in the root and that the folder or files are added to the included file list for your app. Also make sure that the render mode in your app.xml file is either GPU or Direct. Beyond that if you have problems or questions let me know.
Download the sample file here
http://www.thebitcrew.com/downloads/StageVideoDemo.zip