The convert command from the log file says

/usr/local/bin -i /var/www/vshare/video/3.mpg -acodec mp3 -ar 22050 -ab 32 -f flv /var/www/vshare/flvideo/3.flv
Ask your web host if they can run it on the server ?

Path to ffmpeg ends with ffmpeg. Your says /usr/local/bin that is not correct. Ask your web host about correct path of ffmpeg, mencoder, etc... Then fix it in config.php, it should end with ffmpeg.

If video is not getting converted, you need to check if convert command works on the server, if not it is problem with your requirements not properly working on the server.