In fact, the Telegraph story is pretty sparse, mostly being about Twitter in general and some high-profile celebrities who have left of late (such as Miley Cyrus). The functionality, if implemented, would have duplicated the features of third party sites Twiddeo and Tweetube which allow Twitter users to post video tweets by creating links to their own sites.
Here's what Biz Stone told Mashable via email today:
Haven’t read the piece but no video hosting. 140 characters of text including spaces. You know the drill!It's something that developers creating apps for Twitter have to worry about, that Twitter will embrace something they've done, thus ending the reason for their third-party service. At least in this case, it appears they can breathe easy.