According to this GetSatisfaction discussion, SmugMug have implemented support for oEmbed. When I first tried it a few weeks ago, putting a one-line URL in a WP.com post didn’t show the video, but it worked on WP self-installs. Still, you had to hack the URL by prefacing the video URL from the address bar with the SmugMug oEmbed API URL (http://www.smugmug.com/services/oembed/?url=), so that was a hassle. I have found out since that the folks at SmugMug are working with WP on simple video embeds (like the ones at YouTube or Vimeo or blip.tv) — see the GS discussion for the details.
Tonight, I decided to try the old hack URL on my blog (hosted at WP.com) to see how things are coming along. Surprise, surprise, videos play nicely! Have a look below. It’s a video of my tom cat, Felix, sleeping in my arms. The direct URL to the video, in case the embed stops working at some point, is this.