I've easily played 1080p video, but not using a full Linux GUI. The more effective way is to use a command-line video player like mpv that can leverage the hardware decoder and render to the frame buffer.

I made a project for a band to use on-stage where it would switch between videos by tapping a bluetooth foot pedal. The stompbox-style foot pedal buttons were just wired into an ESP32 acting like a bluetooth keyboard sending 1, 2, or 3. The key bindings for mpv were setup to instantly switch to specific videos for each number. It worked perfectly.

I have also used it to real-time 1080p stream my gaming PC from another room using Moonlight so that I could play in more than one location in my home. That was also running directly from the command-line.

But trying to use something like X/Wayland and proper GUI apps usually performs poorly. 512MB of RAM and the 1GHz CPU clock struggle with that.

In my experience, yes to hardware-accelerated video from CLI--running in EGL mode, with no window manager, that RPi model works very well. (A C++ app that uses video as a texture can be surprisingly performant, too.) But no to playing video in a full desktop environment and browser, not smoothly--it's just too much overhead.

An old thin client machine, like a Thinkcentre M73, would do the job, and would cost less than an RPi. Look at EBay.