1. Yes, Stallman would most certainly permit you transcoding the video – this would be your personal choice.
2. I believe transcoding the video to watch it would fall under fair use, and so not covered by copyright, so nobody would be able to deny you this anyway, but I am not a lawyer.
Fair use is only a concept in copyright. The problem with MPEG-4 is patents. You would need to look at the MPEG-LA's licensing to determine if you can encode it yourself.
2. I believe transcoding the video to watch it would fall under fair use, and so not covered by copyright, so nobody would be able to deny you this anyway, but I am not a lawyer.