The way videos work in mala, they show on top of everything else, and they don't have transparency, so you have to make sure you account for that when you're designing your layout.
As for the videos not playing, are you using the latest Mala?
It uses a new set of video drivers that are supposed to be much better than the older version.
I seem to recall having issues with videos at one point, but the newer mala solved it.
Finally, not just any video will work. Your best bet is to grab some from emumovies, because I'm pretty sure all those those are vetted.