I haven't had a chance to dig into any code, and I'm unsure when that will happen, but from what I can see it looks like the video is actually working once the post is made.
It seems like there's a race condition with the thumbnail generation, where sometimes the browser will cache a error response when loading the thumbnails, which is when you noticed that the thumbnails were broken images. Unfortunately, if you want to see the thumbnails, the only thing you can do is to delete the video and re-upload it if that happens during that initial upload. Perhaps give it a minute after the upload finishes before you close the upload popup.
The embedded version on my test site is showing a black background, but I think your background image CSS is what is causing it to appear with the shells on your site. Until the video has finished processing, that embedded preview will be a black box, and that is perhaps an issue that we will be looking into, but it will not affect the video once the post is made.
Ideally, the embedded video will at least show the selected thumbnail from the time it was embedded, and I believe that is the desired behavior. We will be investigating ways to smooth this and solve the issues that are making the initial embeds appear strange, but all of my tests are showing that once the post is made everything works as expected.
If you don't like the thumbnail you chose, or would like to change it after the post is made, you can always edit the blog post and select a new image in the attachments.
You should be able to just attach the video and embed it directly from the attachments. It will look odd at first in the posting frame, but will look right once it is posted, or if you save it as a draft, once the video finishes processing.
Hope this helps, and please let me know how everything goes tomorrow.