I am using Etch (Debian), and Iceweasel (Firefox); and presently Totem is the default for movies. I opened Nautilus; found an mpg file; right-clicked on it; chose Open with other application; found and chose Mplayer; and Mplayer opened with the message: 'Error opening'initializing the selected video_out (-vo) device'. What does this mean? What can I do?

Mplayer has a man page, but it also installs html documentation under /usr/share/doc/mplayer or /usr/share/doc/packages/mplayer/ which is in a much more readable format. There are different video output device drivers that you can use. Enter "mplayer -vo help" to get a list. You can create an mplayer configuration file (~/.mplayer/config) that contains the -vo argument that you want to use by default. There is an example config file near the end of the mplayer manpage.
These are the first 2 lines of their example. Running mplayer with this line in the config file will use "-vo=xmga" as the default.