Hi,
it is because of the dimensions in your HTML code. Rather than 100% everywhere, try specifying the exact dimensions of the movie. IE8 is more compliant with standards, and basically this means that containers need exact pixel height specifications.

You could force IE7 compatibility, but this is a short term solution. All you would need to do in that case is place the following HTML META tag into the HEAD element of each Web page (before tags other than TITLE or META):

<meta http-equiv="X-UA-Compatible" content="IE=EmulateIE7"/>

This will tell Windows Internet Explorer 8 to render each page as Windows Internet Explorer 7 would, fixing your Web site.

(works in IE8, although it will not fix the issue in some browsers)

If you want full screen, you could investigate SWFObject as a solution - http://code.google.com/p/swfobject/

It uses a javascript solution to embed the movie so it displays as you want in pretty much all browsers.

davidp