I had 0.3 and got a home made video (.mov) to work. It was about 5MB but it had sound so I uninstalled that one and re-SSH'd a new copy without sound but it wouldn't work even after about 10 attempts (clean install of vWallpaper each time). So I gave up for a bit then saw 0.5 came out so tried again still with no luck...until....
I went to
www.vwallpapers.com and downloaded some of their vids.
They work fine as long as you
DON'T turn video wallpaper on/of and restart Springboard when you change the wallpaper (ignore the directions, just hot the home button to go back). My 5MB vid still doesnt work but oh well.
^So try that people who are having problems seeing their videos.
Also, the 'bug' about vWallpaper disabling auto-lock? I love it! I always lock my phone when not in use and this 'bug' keeps the phone active while i FTP to it!
Neato!
Good Luck!