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Byeohazard: Been about a year and I still have not figured this out....anyone found a solution?
Write to our Support department and we'll do our best to find out where the problem lies. Thanks :D
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Byeohazard: I finally found the problem! Movies are working. Oddly, Windows Media Player 12 stops working when I try to run the movies from the directory but Divx player was able to play them from the directory. However the movies would not play when I was in the game. I ended up updating the divx player and all is good now. Still don't know why Windows Media Player wont cooperate but Divx is working fine now.
Thanks for the reply!
Great to hear :D

Also, you might want to try the VLC media player as that also supports quite a few formats, in case you need a back up player :D