While the upload API is under development / stabilization ... I hacked in basic firefogg upload support to the add_media_wizard ... Since firefogg works over post you can use it with the existing upload interface (without good error handling).... If you first download the browser extension from firefogg.org you can do client side transcoding by adding in:
importScriptURI('http://mvbox2.cse.ucsc.edu/wiki/extensions/MetavidWiki/skins/add_media_wizar...');
to your User:Name/monobook.js page on commons... once added visit the upload page and hopefully it gives you the option to transcode ;)
This is just a proof of concept demo.. we should soon have real integration ;)
peace, --michael