I have been working with Dolphin for close to a year. I have had my server setup since well before using Dolphin and once I installed Dolphin, I could never get video processing to work.
I recently formatted my server, clean reinstall of Linux...and Apache2, mySQL, PHP5. I reinstalled Dolphin and setup everything as I normally would...as I have done in the past.
This time around...video processing worked! Within an extremely short time, a few minute video was processed and available for public viewing.
My purpose in writing this is to say that I think the fault lies in the first server setup. I was using XAMPP the first time around. Everything has been setup exactly the same minus using XAMPP. Same hardware, same internet connection...same everything.
Anyway...hopefully this is a possible resolution...or maybe just coincidence.