I have this issue too, except that the video is not lined up with the audio. You hear the voices before the mouth moves. Then the audio starts cutting out and eventually the screen blacks and you have to reset.
I have heard that itunes has stopped supporting front row, which is stupid because i use it a lot.
At last someone else has the same problem.
I have tried contacting support and the local store but all I have found out is that Frontrow isn't supported anymore though lack of interest.
I found that all my old movies still play in Frontrow but all but one of recent downloads from iTunes just plays audio with a black screen.
The Apple suggestion was to download a third party programme to replace Frontrow.
Apple mentioned XBMC and Plex appears to be an alternative.
I haven't tried any alternatives and would be interested to know how you get on.
New iMacs don't even come with a remote.
I mainly use my iMac as a multimedia centre and was building up an iTunes movies folder, even though the movies can be more expensive.
The recent movies still play directly from iTunes but having to start the movie from the iMac seems a really backwards step.
Support claim that my problem is uncommon and they don't have a fix.
I am using Snow Leopard. By the way Lion doesn't even include Frontrow.
I agree that this is really stupid of Apple and has stopped me buying movies from iTunes. One of the features that set iMacs apart from PC's is their out of the box setup with remote access to your media.
Get your act together Apple and fix this problem!