How exactly do you chose the file. Can you send a screenshot? You should just click on the picture box top left. This empties the playlist and loads the single movie. If you click add then it adds the currently selected video to the current playlist and will play it when it gets to it.
To use the bottom buttons you have to click the vlc button first otherwise its acting in mp3 mode and will control winamp.
edit..and yes thats the right skin settings. Most of the functionality is in the swf file. You need those labels to send data to the swf file.

