files in subdirectories won't play?

We have FMS3 and I needed to serve flv's from a different directory than the default vod directory. First I created a new application (new_app) and set the source directory to be the directory I need it to be, a directory called "bcflash" inside my website. When I put an flv file into the bcflash folder and attempt to play it with the vodtest.swf sample file, I get a connection error. If I copy the file to the main vod/media folder it plays fine. After I have played it from the vod/media folder, it plays fine from the bcflash folder.

I thought maybe the source directory needed to be inside the new_app directory as with vod/media, so I changed the new_app source directory to be inside the new_app directory, which is under FMS3/applications. So now, when I put an flv file into the source directory it plays the first time. Great. But...

I need to create subdirectories inside the new_app/media folder to organize the flv files. This SEEMS to work in the vod directory, but seems NOT to work in the new_app directory. To clarify, if I create a folder "test" inside vod/media and place a flv file in the test folder, it plays the first time. If I create a folder "test" inside the new_app/media folder and place a flv in the test folder, it will not play the first time. If I place a copy of it inside the new_app/media folder and play it, then move it to the new_app/media/test folder, it plays.

So my questions:

First, is it possible to have a source directory for my media that is not inside the FMS3/applications directory? I have the new_app directory in there, but had the media folder for it pointed elsewhere and it didn't seem to work correctly.

Secondly, can I do subdirectories? How can I get the media to play from the subdirectory without playing it first from the root directory?

Am I misinterpreting something? Have I misunderstood something? Is this a limitation of FMS3 that would be resolved by upgrading to FMIS3? Thanks in advance.