I may have found a solution to the video comverter problem. I found a free video converter that will convert most video formats for free and including .flv and .mp4. The software is called prism video converter from NCH software: http://www.nchsoftware.com/prism/plus.html. There is a free and paid version but the free one does a great job.
Heres what i did:
converted my 2 videos with the prism converter to .avi leaving all settings the same and then used the SMC v.4.256 and converted my videos to my 4gb fuze and it works perfect.
I suggest you try it out for yourself and see if it works for you.
Some more specs about my pc:
Windows XP Pro Sp3
Klite Codec Pack Mega 4.31