Not that strange, I switched the default player from mplayer to gstreamer and it doesn't like the mp2v format. I didn't use xvid, because VLC ha(s/d) some issues transcoding xvid to xvid which lead to no video and just audio.

If you upgrade the server and reset the profiles, you get to use h264 which gives a nice video quality boost and should use less battery too. And if you don't need subtitles and have normal SD material in xvid/divx, passthrough profile should be used for unaltered video quality. And you can always revert back to mplayer playback if you put the word "mplayer" in the player field of the profile.