The tiny image in the flowplayer window is a flowplayer thing. And it might not be related to the screenshot. Some videos display as tiny thumbnails for a few seconds before popping into their real size.
tokyo.poodll.com does seem to be working now. So perhaps check your PoodLL filter "Audio/Video file conv" settings and make sure auto conv to mp4 is on, and "use ffmpeg" is off , and also check that "use preview as splash" and "show simple video splash" are on in the flowplayer settings.
Personally I think everyone should look at using FFMPEG on their Moodle server. PoodLL can use that to do conversions and splash file creation, and also to run conversions in the background, and for mobile device uploads. So if that is an option for you, please consider that.