The internal video playback can be tested by the programs/mythavtest tool:
mythavtest /myth/tv/1003_20060302232800.mpg mythavtest dvd:\\ mythavtest dvd:\\/path/to/dvd.iso
Without an argument, this tool also exercises the "Live TV" recording chain. This can even be done on a machine without any tuner cards by creating a dummy MpegRecorder which loops through a sample MPEG file.
On a machine that supports V4L, just add an IVTV type card in mythtv-setup, with the device set to something like "file:/path/to/some/mpeg/file.mpg". You also need to attach the card to a video source.
On non-V4L machines, you currently need to manually create entries in the capturecard and cardinput tables. videodevice=file:/path/file.mpg, cardtype=MPEG, inputname=MPEG2TS. On such machines, you also need to have built the backend with --enable-hdpvr