The way you describe it now, it sounds exactly like symptoms of the "IE no longer supporting plug-ins" issue, which I described earlier. You can view video when it's a direct link (as opposed to embedded), you can view it embedded with Netscape, but when you try to view the embedded video with IE, no dice. That's a textbook example.
The thing is, Microsoft's decision to no longer support Netscape-style plug-ins supposedly only affects Windows users, or so I read in the quicktime help articles. I don't know if that means that Microsoft still supports plug-ins in their Mac version of IE, or if it means that it's not necessary to support them, because somehow the Mac OS takes care of it some other way. Seems to me that it's more likely the former. If Quicktime built a non-plug-in version of their player for Windows, no doubt they did so at some point for Mac as well.
Anyway, my only other guess would be your OS... I use a Mac which has OS 9.1 with the latest version of IE and Quicktime and it works just fine. Assuming you already have the latest versions of IE and QT, the only difference between your system and mine (assuming you haven't done any other system tweaks that might affect it) is the fact that I'm using a more recent version of Mac OS. It's a definite possibility, although it is a complete stab in the dark, since I'm not a Mac expert by any means.
Good luck.
Sincerely,
Jonathan