Once you are in the iPod Touch video settings you have a few options. At the very top you can decide where you want the video to start playing. The default it is set at in the iPod Touch is to start again where you last left it, which is good for quick bursts of viewing. If you leave a movie halfway through and then open up that movie again you will be in the spot where it last was. The only other option is to set it to always start at the beginning.
Below that is the ability to turn on the closed captioning, which is a great feature for hearing impaired users or those in noisy areas. Try out the closed captioning on a video segment to see if it will work for that one, but some videos purchased on iTunes will have closed captioning.
Below that top section is one for TV Out. Here you can turn the Widescreen viewing capability on or off. You can also choose between NTSC and the European PAL TV Signal.