I wish did fix the issue. Well, I managed to get this sorted out. Ultimately I gave up on doing pure HTML5 and went for JWPlayer which works quite well. Though, even when I started using that, I still couldn't get things to work perfectly. The final piece of the puzzle was ripping the videos from the DVD again using Handbrake and checking the "Web Optimized" option. That, combined with JWPlayer, has completely solved my issue. I hope this helps out some other poor soul who has to do Web video work.
Flowplayer loads but doesn't play video in Google Chrome, works in other browsers
To fix the issue you can do With some help from the people at Flowplayer I have resolved this issue. Flowplayer by default uses a HTML5 engine. I was forcing that engine to be flash with engine: 'flash'. This is wrong! Here is a simple, working configuration that I have tested on all browsers: