I Had earlier posted on How to enable DreamScene Video Wallpapers in ALL Windows Vista Versions but it seems that Microsoft had sometime back released a small patch that comes with one of Microsoft's own video's which you can set as a Screensaver in Windows XP. So I guess Video Screensavers are NOT just confined to Windows Vista anymore.So essentially what you can do is - download and install this package from Microsoft Website(You will need to undergo WGA) or from Softpedia(without any WGA checks). Once you have this installed, it allows you to browse and set any Video in your computer as a Screensaver.
This software is also not constrained to just playing wmv files as a screensaver in XP but I was also able to play .avi files. I guess it is using all the codecs available with your Windows Media Player.
Go ahead and beautify your Windows XP!!
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