manel, if video is not getting converted, problem is with the mencoder (or ffmpeg) used to convert video.

mencoder is a program, that only work if it is installed properly. Some times, it is installed from RPM on linux, can be old version. So better run the conversion command on your server and see if it works.

You can find more details at

http://forums.buyscripts.in/viewtopic.php?t=351