It is technically possible to do both directions of the GIF<->video conversion on-the-fly at all points of the network. Web servers could deliver/generate video files for clients that request GIFs, transparent proxies and caches could grab the video files and translate back to GIFs for dumb clients, and browser plugins could seamlessly replace GIFs on a page with the video files.
In fact, behind the scenes this might be happening now - technically your ISP could be doing this and the 1MB GIF you download has been reconverted from a video file back into a GIF at your local proxy cache!
In fact, behind the scenes this might be happening now - technically your ISP could be doing this and the 1MB GIF you download has been reconverted from a video file back into a GIF at your local proxy cache!