Thanks to those that took a moment for a constructive answer! Turns out that using the embed/object parameters slightly differently solves both the thumbnail and auto-orientation issues.
The bad thing is that the video object (at least using Quicktime - iPhone Safari doesn't support the HTML5 video tag yet) can't be scripted via Javascript.
The ADC has absolutely no mention of scripting the iPhone video object via Javascript - it doesn't say it can't be done, but the object doesn't fire any events that I can find either.
We use JS to handle tracking - we need to know how much of the video the user watched, if they muted it extensively, etc. due to the credit requirements of one of our clients. We'd love to deliver an iPhone-capable version of the site, but without scripting capability it won't happen.
So the bonus question to this post is does anyone have (or has anyone found) information regarding scripting the iPhone 2.x video object from a web page using Javascript?