Video not playing during timeline preview?

I am having the same problem with previewing the video on the timeline. I only work on my hard drive so it is not a network issue. When I play the video it runs but if I pause the video and then try to play from there the video stops. The timeline continues but the video only plays from the beginning. This makes setting up timing for interactivity very difficult.

I am attaching an example file. From what I can tell, this is an issue with any of the video examples I have used.