After a few minutes tweaking, i managed to get a working video into trespasser with audio. It doesn't quite look the same as tc-isle, the sort of scan lines, but no point in being picky.
Get the old smacker from the rad game tools site.
Create a video, of 640x480 resolution. It may be higher but I haven't tried yet myself.
Audio can also be included.
I used 22,055 Hz at 16 bits, though this shouldn't matter.
Run smacker tools, now on the left file browser, look for your avi, mov or other type of file, and select it.
Click on palette in options. Click on the three dots '...' and browse for a retail video, such as tpassintro, credits etc. Select it.
Click on sound. Choose 22,055 hz
, output as 8 bit sound
Now click smack, and copy the file into the menu folder of trespasser (located within data folder)
You can choose to rename it, or run it from within a level using tscript. I'd recommend renaming to tpassintro, or credits, to test it to see if it works.
That's it. I didn't really mean to write it like a tutorial, but just in case some new level editors would like to put their own video in, I included some extra detail.
It should work hopefully.
Someone may have already got it to work, but at least here are settings which worked for me. I haven't seen another post with working settings, so hope its use to many.