The reason they do this because they dont want phones to start downloading potential large amounts of video data over 3G just because the user visited a web page. They actually changed this in iOS 4.0, but we'd been able to make it work via a workaround, but Apple have now plugged that hole and I've been unable to find any alternative work around.
They seem have got it to reliably start fullscreen. We'd sometimes have it start fullscreen. Other times the the video would start in a window with the browser address bar above etc.
They have the problem we had with 4.3, that you cant do anything when the user hits 'Done', so they cant be sent back to the video list etc, so you either end up in a frozen video page, or a black frame in an empty browser window (requiring you to use the browser back button etc). We instead wanted to be able to send the user back to the channel list or recording list, and it's no longer possible using their method.