Well I can already see some issues that may or may not be causing the problem. First, I think the swfobject file should be loaded immediately after the jQuery. The video extension may not be detecting it properly if loaded after.
The “resumeOnVideoEnd” is set to true by default, so no need to set it, but the trailing comma will cause an error in IE and stop the slider from initializing.
The html for the third slide is missing an opening <li> tag which my be associated with the problem you are describing.
Hmm, are you testing this live on the web or locally on your computer? When you test it locally, it doesn’t work properly because of a flash security block. If it is online, and still having this same problem, then please share a link so I can get a better look at the problem.