Thanks. With your suggestions I tried some experiments with Android video players and Library Server video conversion settings.
I found VPlayer to work on a wider variety of video formats in my library than MX Player so I went with that-- although I'm not sure Gizmo uses that.
I was able to use VPlayer to play files accessed directly using ES File Explorer, so I was able to eliminate the video player as an issue.
I then tried a few Library Server video conversion settings. Although I only tried a few, setting Video Conversion to "MPEG2/DVD NTSC Stream" seemed to work well. Keeping "Play local file if one that matched Library Server file is found" checked should keep Library Server working fine for access from networked PCs.
In any event, I am having far more success with playing video files using Gizmo on my Nexus 7 now than I was a few days ago.
I'm a bit confused here. The only format MC will stream to Gizmo, JRemote, etc is a H264/AAC in a Mpeg2 TS container.
Changing the DNLA settings has no effect, nor does "Play local file if one that matched Library Server file is found" (that's for playback in MC).
The only thing you can change is the size/quality IN Gizmo under options.
Gizmo uses the default media player so if VPlayer or MX Player are installed and selected as default that should be what gets used.
Some of the players have their own optimized hardware codec packs which is interesting.
BTW, the Nexus 7 here got an update to 4.3 yesterday and it still plays fine.