I hate to say it and I would love to be proved wrong, but my theory is that it was a hoax (an impressive one as he was able to convince big names) and I think he did it with encryption. Here's what I think: what's fairly established is that Sloot used "shared resources" which each user of the system was required to have in order to decompress/view the movies (here's a picture of the box with the shared resources: http://www.nethwork.nl/images/kastjesloot.jpg).
Now this box had one or multiple storage devices which stored encrypted copies of the hundreds of movies that he used for the demos (with perhaps some RLE to save space). The chipcard contained the secret key for each movie and here is how I think it worked:
1. The chipcard (8 KB in size) containing a secret key is inserted into the machine.
2. The source code is decrypted using the key and compiled for each run (this would explain why no one was able to get their hands on the source code).
3. The movie is extracted/decrypted from the shared resources by following the sequence provided by the secret key.
In other words, he got away with storing the full sized movies on the disks simply by saying that they were shared resources.
Once they got a few days away from the release the realization that he be exposed, caused the stress that lead to his unfortunate death.
