I did some testing using Big buck bunny (mirror.bigbuckbunny.de/peach/bigbuckbunny_movies/big_buck_bunny_480p_stereo.avi) and winrar:
zip - plays
zip & password - name appears in vlc nothing else happens (plays when opening zip in explorer and then opening file there(pw entered in explorer))
rar normal compression - nothing
rar no compression - plays
rar no compression - multiple parts - nothing
rar & password nothing
(same for rar5)
and also with a .h264 file (
http://mirror.bigbuckbunny.de/peach/big ... p_h264.mov)
rar normal compr - nothing
rar no compression password - nothing
rar no compression multiparts - plays
rar no compression multiparts password - nothing
I suspect that for the same reason vlc does not handle compression it also can't handle passworded archives