What is the recommended cluster size for an NTFS volume on a Western Digital Passport USB hard drive for playing AVI, MKV, and VOB files in 1080p resolution using Western Digital's WD TV HD Media Player?
The best cluster size is normally the one that is automatically suggested by the format dialog. This is at least as large as the size of the hardware sector, which is the atomic read/write size.
Using a larger sector size will mean that the O/S will need to issue multiple read/write operations to the driver to write it out or get it into memory. Using a smaller size is even worse (as I never tried I don't even know if it's possible).
Conclusion: If the Passport USB is already formatted in NTFS, don't worry. Otherwise, let the O/S decide.
It probably isn't going to make much difference really, as your bottleneck is going to be elsewhere, but for relatively small numbers of large files as found in a video collection a larger cluster size will be more efficient.
The primary reason to want small cluster sizes is space efficiency. With most filesystems each file stored wastes approximately half a cluster of space on average (up to almost a full cluster). This isn't an issue with large media files - you are not going to notice 16K (likely average) or 32K-1byte (worst case) wasted when storing a a 1Gb+ high-res video file on a filesystem using 32Kbyte clusters. If you were storing many many thousands of much smaller files though the space wasted by large clusters can become a big issue - for example a mail server that uses file based storage would be very inefficient on a 32Kb cluster filesystem (in this instance you are likely to waste more than 16Kb per file on average as you will have many file no more than a few Kb long).