If you can use the latest psychopy source from github, and can (or have ) installed opencv with the python cv2 binding, you should try using the new MovieStim2 class. There is a demo in demos/coder/stimuli/movie2stim.py. It seems to be able to outperform MovieStim and play even HD videos smoothly. It uses pyvlc for audio and opencv for video rendering.
The current code works well for standard video playback without looping. I will be submitting an update this weekend that has full seek and pause support as well, and ensures the video keeps up with the audio if you are using a very slow computer.
Note that Jon's solution should work, but you will not be able to get events from psychopy (using getKeys() for example) when the Qt window has focus. You will either have to use Qt's event system or psychopy.iohub.
All around, using MovieStim2 is likely a much simpler solution.
Thanks.