Since I got my 7D, I will have maybe 1/3 of the video files display "Cannot read file" when on the camera, but when I pull the video on the computer, it will play fine. I assume that the camera is very picky about the header information in the file.
Is this the same issue with the 1.2.4 update? I wasn't sure what it was and thought it might be my memory card. Even so, I have never had a file fail to play on the computer.