I think that's a very interesting and worthwhile effort. Have you thought about making your player in Silverlight?
The player on Channel9 is Silverlight, so the WMV files there are already perfect for streaming and wouldn’t need to be downloaded. The Ajax MediaPlayer control that’s part of the ASP.Net 3.5 Extensions has built in support for time-based subtitles. Or alternatively, with Silverlight 2.0, you could also easily write this in C#. And you’d have easy access to call web services or WCF services back to your transcript repository.
Best yet, you can use Silverlight Streaming to host your player and get free high bandwidth distribution worldwide.
I'll try to contact you through your blog. Let's not distract the discussion from the webcast.