A resolution increase of the videos would probably take place when Apple releases a "real" iPod Video with a higher res screen. It depends on how successful the videos in iTunes are and how successful the video-enabled iPod 5G are.
320*240 certainly is good enough for the iPod's small screen, but I actually still expect a widescreen iPod video down the lane. Steve Jobs once said that they had tons of ideas for iPod features, but once they added one, they can't really remove it in the next version. So I guess video playback will be better in the next revision. And video resolution is certainly one point that has to be addressed in the future.