Does the existing UGC module have the flexibility to allow inserting images and video content as part of comments. If not, can this be done with any customization?
This is a tricky functionality but doable I think. You can use BBCode to define rich content for your comments (images, links, links to videos like youtube videos). The main problem about using BBCode is that either UGC or the Browser won't understand it, it means that you will need to write a parser from BBCode to HTML. You can extend the UGC Server Controls (.NET) or Tags (Java) in order to get the UGC comment including BBCode and parse it converting it in HTML.
You mention in your comments: "We have a requirement stating that reviewer's should be able to add images/videos as part of the comments". As stated (i.e. you have reviewers that need to leave comments), this requirement may better be satisfied via SDL Tridion's Workflow.
Workflow already provides the facility to leave comments for the next reviewer in the process, but you can also get your reviewers to simply edit the Component with the images/videos. If you don't want reviewers to edit the actual content component, you can add a component link to it pointing to a "review component" where your reviewers would have permissions to edit it.
If you have a concern that the reviewers only need to look at the published/rendered content, then you can email them a link to the Preview/Staging site and a link to the Workflow task. So they can take a look, then go to the task and the component to leave their comments/edits. Also consider using Experience Manager for in-context editing (giving the Reviewers group access only to the Review component).