You can output movies via HDMI that you rip or download and put on the sdcard, just not movies through apps like Blockbuster.
I have transferred a movie (avi file) from my computer to the phone. I can watch it on the phone but I get no video output from the HDMI cable (the cable is fine as I get output when I play video taken on the phone).
So I ask again since you are saying it works for you.....are you putting the file in a particular folder? or do you think it may matter what type of file you use?