how big is your memory card? other than that i can't see how our setups are any different... i only have the default 64mb card.
a few hours of toying with it to no avail, i finally just uninstalled the whole deal. whether it was set to use media player ir mplayer, whether it downloaded or streamed, whether it saved on internal or external memory...
no go. are you sure there's no steps you're forgetting to mention? or is there anyone else that this has worked for that can chime in?