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HAM8 video works just fine in CDXL on 020, the Tower Assault intro was HAM8.
One thing you'll need to keep in mind is that the CD32 only has a 2X Speed CD player. So at most (when playing from a CD) it can play back 150KB per second. This is the single biggest limitation on resolution and framerate.
For example, in HAM6, if you're running 320x216 at 20FPS.
320 * 216 * 20 * (6/8) = 591KB per second, which is too much for a 2X Speed CD drive.
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