Comment 2 for bug 381664

You are using the server kernel, which uses PAE. GEM is not compatible with PAE and is therefore disabled.
That means you get the fake bufmgr, which is too small to handle video correctly (fake bufmgr (1024 kB)).
Unfortunately, allocating more memory for the fake bufmgr was tried during jaunty development, but was causing other problems.
If you want to play video, you should use the -generic kernel instead of the -server kernel.