I was also getting the "Movie playing failed. Connection error." message. I tried signing out and reauthorizing, but to no avail.
Then I thought I'd try streaming straight from the Netflix site, and it worked fine. I switched immediately back to boxee and it was now working. I think following the Silverlight install, there must be some additional authorization it does with the Netflix site in the browser that's needed prior to running in boxee. Maybe I didn't read the instructions. :-\
However, now that it's working, I'm seeing the stuttering issue others have reported. It's fairly bad in browser (on the same system), and worse in boxee. Basically unwatchable in both.
My internet connection seems to be fairly solid with 10780 kb/s downstream and 26sec latency, but who knows what the connection w/ netflix is like. Firefox and bxflplayer-osx are both running around 70-85% in top.
Apple Trailers in boxee on the other hand play back perfectly in 720p. So it seems the issue would either by silverlight, or netflix' network connection.
Kudos definitely go out to whoever put together the Netflix interface. It looks great. Thanks!
Mac mini, 1.83C2D, 1GB, 10.5.5