Iterestingly I suffer from a quite similar problem. Uuhm... actually I suffer from the exact same problem. I just now wanted to make sure it does play some videos as it still did a couple days ago, but it doesnt. Even the included 9.mp4 and Nokia_N900.mp4 dont play anymore as I just found out.

Some more information:
Got my N900 beginning of Feb with the latest 2009 firmware. Everything was ok and my test DivX was playing well. I then upgraded to PR1.1.1 and played around with testing and devel and broke my phone, on purpose actually, to find out what I can and what I shouldnt install I then reflashed my phone, flashed both images (FS and OS) and now my DivX nor anything else which played fine wants to work anymore.

Stuff installed:
Battery-eye, BatteryGraph, Cinaest, Conky, Coutdown Timer, Fuelpad, JoikuSpot, qTranslate, stopwatch and what I suppose it could be: MediaBox. Although I thought its a player only and doesnt interfere with the system at all.

Anyone got any ideas? The files dont play either with mediabox btw. They load, duration is shown but playback doest start, progressbar stays inactive, on both players. DivX/XviD/AVI as well as AVC/h.264/MP4.