They can, but then they have to hand the result back to the browser to render, which can be slow.
Check out the new stuff coming in flash player 10.1, which will have some hardware acceleration, BUT not on OS X because it requires updated video drivers. Since Apple controls the video drivers on OS X, we just have to wait for them to update them (and since they don't seem to like Flash much, it could be a while).
Well, VLC et al seem to be able to decode and play videos without a problem, and one would think that the remaining 85% of CPU would be enough to copy the decoded image data into a buffer for the browser... But I haven't tried to do it myself, maybe it's harder than it seems.
Check out the new stuff coming in flash player 10.1, which will have some hardware acceleration, BUT not on OS X because it requires updated video drivers. Since Apple controls the video drivers on OS X, we just have to wait for them to update them (and since they don't seem to like Flash much, it could be a while).