Well, it happens that people forget to put a backslash at the end of the movie path when they change their videos directory. Not saying that you did it, but a simple reinstall would fix it if it's broken. Yup, you can "just" double-check the movie path in the registry, but then make sure that it's copied from the address bar, and not typed by hand.
If not that, then some codec (other than TM2.0) is trying to play the FMVs. Uninstalling all the codecs (and I really mean ALL) and then installing the TM2.0 should fix it (you can install the other codecs later, just make sure that it all runs fine in FF7). Drastic measure, worked for years... Non-drastic measure would be to tweak the codecs, but you already tried that...