Pixellation comes when the bit rate of the video is low. Low bit rate will result in low file size. So even with a video of resolution 200x300 (high bit rate) there will be no pixellation.
In case of g3, the screen resolution is too low when compared to 720*480 and hence even if the but rate us low the video will not look pixellated but will actually look sharper.
I've been doing this testing on my psp which has a rather low resolution for a competitively large 4.3" screen
so the verdict, any video that has resolution more than 240*400 will look sharp.