Your problem is your 3G phone. Upgrade or be left behind.
I have a iPhone 4 with ios 4.0.2 and the same thing is happening to me. I'm wondering what the issue is. I'm starting a restore just to see if that helps. I want my flix.
Edit : Restore finished with backup settings, same effect. Try to start viewing a movie. It switches to the Loading Movie... screen and then quits and brings up the movie selection page.
Edit: Just for grins, I restored and set up as a new phone and only put the app on. Same effect. I tried to start viewing a movie, it switches to the Loading Movie... screen waits a few seconds and returns to the movie selection page.