Since 1.6 with WP 3.4.2 worked perfectly for me, after an update to 3.5+1.7 no video (in any format) could be uploaded anymore. It makes the upload, the file arrives (after long time, obviously) in the gallery directory, but the message still appears:
0 Video(s) successfully added.
The same result, if I make a scan of the gallery folder (after an upload with FTP)...
Anyhow, the combination 1.7 with 3.4.2 works also!