Is it possible to stretch the particles vertically as they fall? Maybe some form of modifier where the globs strech in the direction they are moving?

That would work, um... if its possible.:confused:

Sure you can :)
Just enable stretch direction to 'velocity' under 'geometry' tab in HV and choose the amount. Also 'mantain volume' should help in the case of water.
Here is a little example with HV particles and collision enabled..

This maybe past due but the Vidomi media player plays vidx videos and once you install it your other media players should have access to the codec to.

that looks sweet, buco , I'll have to try that!