Art, yes. Videos, no.
Speedpaints can be cool when done right, but they're not always done right. About 6 months ago, a guy submitted a "speedpaint" that was 28 minutes long. It was removed or I'd link it. But still, speedpaints, as cool as some are, they're not animation.
Newgrounds started as a site that hosted animations and games done in Flash. While the available software has expanded beyond Flash, the fact that this site caters exclusively to animation sets it apart from others.
Allowing more speedpaints by creating a place for them encourages more of them to come in. Separating the animation from the 'movies' is an option, but it opens the floodgates for massive abuse.
I fear that the animations that people worked hard on, and were the core and heart of Newgrounds, would be eclipsed by the sheer volume of the videos that people didn't. Examples?
A child with a video camera can be a dangerous thing. When one sees this, someday, another will want to "do that too." With the automated system here on newgrounds, the constraints can easily be missed, and then abuse happens. (Yes, the file size and run-time you saw are correct.)
For every video submitted, there's that danger that someone will decide to copy them. That's great with flash. Yes, PLEASE come join us in making GOOD animations. They don't have to be perfect, but we can tell if you tried and if you didn't. I'd MUCH rather see a submission that's still not perfect, but he keeps improving and trying, than to see anything from a bored kid with a camera. (BTW, that's a 'speedpaint' ...er, speed-draw..?)
Youtube accepts everything, and that's why we avoid it and spend so much of our lives here on Newgrounds. Opening the door to more videos opens the door to "Newgrounds" becoming "Newtube," and hard working animators' works being mixed in with those who didn't, those who don't, and those who can't.