It's a little convoluted, but then that's iTunes. When you drag items using Finder, if it's just an m4v file, iTunes assumes that it is a home video and automatically moves it to that category (and folder). In order for iTunes to see it as a "movie" and put it in that category, you have to do the following:
1. Put the files in the "Home Movies" folder and add them to your Library;
2. They will show up in the Home Movies category;
3. Now, while in iTunes and in the Home Movies category, select all of the ones you want to be in the "Movies" category;
4. While they are selected right click and go into "info", and then "options";
5. You should see a media type option that will say "home movie";
6. Change that to "movie".
What that will do is create a folder for each movie, and move the movie and the folder over to the Movies folder and delete it from the Home Movies folder. It also adds a hidden ".DS" file the each folder. Yes, it's a stupid thing to have to go through, and I've got a lot of movies, but for some strange reason known only to Apple, you have to go through this drill in order for Apple to "process" it as a movie.