CB Activity uses the gallery parameters of the profile gallery. This means the Gallery tab parameters. If those parameters are set to use global then it of course uses the global parameters. The video also needs to be mp4, ogv, ogg, webm, or m4v as they are the only HTML5 supported extensions; any others will just be treated as a File gallery type.
I have also tested on your demo site and there I get the same stuff...
That's because video uploads are specifically disabled on our demo site.