I have roughly 80 movies on itunes, saved to my hard drive. Today i tried to transfer a movie to my iPhone (i never do that, i always just watch them on my macbook pro) and it said "movie was not transferred to iPhone because it cannot be played on this iPhone". Well i started to play around with it and i noticed if i right click on the movie in itunes it says "create iPod or iPhone version". I did that and it let me transfer the movie to my iPhone and watch it. I think the resolution was too high for my 3G. Im not sure if this is the exact problem you are having but i would give it a try.