You're probably seeing only the boot partition which is less than 200MB. To see your actual Android space and transfer files to it you need to boot into CM7 and connect your Nook to your computer with the power/usb cable. You should see a notification pop up on your Nook (if it doesn't you can manually check your notifications), which will have a button to enable USB. Tap that and confirm it on the next page.
Two new drives should show up on your computer, one will be your Nook's internal storage and one will be the CM7 storage on your SDcard. Now it's just down to drag n drop.
The VLC media player will play almost anything, get it at the Play Store.
I haven't used CM7 in a long time, so i'm sure some experts will be along shortly.
AS for your space, when you formatted the uSD you should have expanded one of the partitions...so depending on what you are told by more experienced minds, you may have to reformat your uSD and start over. (I had to do this several times. it gets easier)
CM7 will allow you to see videos stored in stock, as well as pictures, documents, and sideloaded books. Open your gallery and you should see your pics and vids.