I have two Canon cameras, but haven't tried videos yet. I would expect they would play on the iPad, as others have stated here.
Where do you see the greyed-out thumbnail? Is it in the Photos App, or is it in the Videos App? I assume they would only play in the Videos App, even though they are imported by the Photos App.
Perhaps someone can tell us the procedure for playing imported videos.
The videos from my canon compact (G10) play ok when imported via the camera connection kit - they import, appear, and play in the Photos app just by tapping on them. They need to be in a supported format :
Video formats supported: H.264 video up to 720p, 30 frames per second, Main Profile level 3.1 with AAC-LC audio up to 160 Kbps, 48kHz, stereo audio in .m4v, .mp4, and .mov file formats; MPEG-4 video, up to 2.5 Mbps, 640 by 480 pixels, 30 frames per second, Simple Profile with AAC-LC audio up to 160 Kbps per channel, 48kHz, stereo audio in .m4v, .mp4, and .mov file formats; Motion JPEG (M-JPEG) up to 35 Mbps, 1280 by 720 pixels, 30 frames per second, audio in ulaw, PCM stereo audio in .avi file format
Whilst in GoodReader I can then copy them to it and view them in that app as well.