Although I haven't yet tried it myself, there seems to be a common issue with videos in the HTML5 widget specifically. Whether this is a bug in iBA or whether the iBA HTML5 widget just doesn't support video at the moment (even it the video file is mp4) - maybe someone else here can shed light on the issue.
However, the media widget allows an mp4 video to be included in an ibook with no problems. Perhaps this other widget would cater to your requirements?
Currently Being ModeratedMay 17, 2013 2:28 PM (in response to gadgetgurl42)
Unfortunately, I have to do some other things, so the video is only a little but important part of my widget. All the other functionalities of the widget, fortunately, works perfectly.
I hope Apple is going to fix very soon the bug.
If no other can give some code that let me allow to reproduce some media content (video and/or audio) in my widget, I will look for some workaround but it will not be the same :-(
I've noted in a couple of other threads that this sometimes works for me.
Find the original video file in Finder, select it, then
Finder > Services > Encode Selected Video Files
I haven't experimented with all of the settings to know which is "best", but try something appropriate to your content. When it's done, re-import the new file into your widget or iAd Producer project.