That obviously depends on how you want to take on that challenge. The website you showed me runs rather smoothly on my computer, but had to buffer sometimes nonetheless. A lot of it will depend on the quality of your video files, whether they will be held in fullscreen and several other factors.
A Belgian advertising agency thought up a pretty good way of covering up low quality footage for example. clickie
Normally, adding an extra alpha layer to your video shouldn't cause that many problems in performance if your media server is up to the task. The only way of -really- knowing whether it is possible or not, in my opinion, will be a case study.