MP4 is unfortunate, since its not a primary streaming format, so I suppose you actually are looking at transcoding the whole movie first and then getting the resulting file?
Windows can usually read TS files with H264 in it, of course Windows Phone might be a different beast entirely, the MP4TS Streaming profiles won't work? (which is a MPEG-TS stream with H.264 Video and AAC Audio)
Usually I would say to just call GetFile with a conversion parameter set, and it would give you the file immediately as its written to the disc, but of course thats only useful when you can actually process the streaming video format, or you want to store it locally before playing.
It can take quite long to transcode the whole file before playback can start, so this seems like a solution not really worth spending too much effort into.
However, if there is no way to get a streaming MPEG-TS to work on Windows Phone, I suppose I can try to look into the functionality of the prepare parameter, and its return information.