Usually, when you create a movie file, you use some sophisticated compression codecs like DivX. If this is the case then :

Maybe the OCX control is not able to use the codecs (decoder) in order to play the AVI.
It could be it, or it could be that the codecs are not registered properly (try Multimedia on Control Panel, or play the movie with Media Player).

Why don't you insert a MediaPlayer control in your form ? It will be playing right, but you will have to distribute the OCX of course, which sucks...