I can't find a chipset layout for the G400 line to compare to the one Anand has for the Parhelia (I really really prefer model numbers like GXXX or TNTx than "named" models, they sound fruity). However I think the lack of overlay on the second monitor was due to the fact that the second display wasn't actually passing through the primary RAMDAC on the G400, and I presume on the later cards. It was passing through a second chip that ran the second display port. (I had to go back and look at old AT articles to find it.) I assume that there was processing being done in the primary chip which didn't get done in the secondary chip.
This post on the Matrox support forums has a Matrox tech specifically stating that overlay does not function on the second display (2nd post in the thread).
Is it possible that some of the people that are getting AVI, et cetera to work on the second display aren't displaying in overlay mode? (I don't know enough about the video playing to know for sure if that's the only way it works.)
DVD as has been mentioned does work on these chipsets, and fullscreen (DVDMax) seems to have been a feature on the second monitor through all of them as well.
As for the Parhelia, I'm not sure how the triplehead feature is set up exactly. I assume that you can put an adapter cable onto the primary port which allows you to use 2 monitors (as the controller #1 has two RAMDAC's), and a single monitor on the second port (Anand doesn't specifically mention it and I don't feel like reading any other articles). Based on this, since the "third" display will have limited capabilities, it is possible that the second port again won't support video overlay, and that in order to have dual monitor overlay, you'd have to have both monitors running on the primary port with the two-port adapter in use (more than likely that'd be the way to do it anyway, due to higher resolution being supported and all other features being available on that port).