videos only stream from the media folder

You can edit Application.xml as follows:

<Application>

<StreamManager>

<VirtualDirectory>

<Streams>/;<FMS Installed Directory>\applications\vod\mymedia</Streams>   

</VirtualDirectory>

where "mymedia" is folder you created under applications directory.

you need to setup virtual directories in application.xml looks like this

<!-- This section specifies virtual directory mappings for file      -->
  <!-- objects in the script. By using virtual directories, you can    -->
  <!-- specify file directories for different applications. If the     -->
  <!-- beginning portion of a file path matches the virtual directory  -->
  <!-- that is specified, then the storage location of the file maps   -->
  <!-- to the location specified by the virtual directory mapping. To  -->
  <!-- specify a virtual directory mapping, you first specify the      -->
  <!-- virtual directory, followed by a semi-colon, followed by the    -->
  <!-- actual file location. <virtual dir>;<actual dir>                -->
  <FileObject>
   <!--
   <VirtualDirectory>/flashapps;C:\dev\Code\Flash\tincan\flashapps\</VirtualDirectory>
   -->
  </FileObject>