I remember Microsoft released a patch/hotfix about a year ago that remedied problems similar to what you described in many games. So, first of all, make sure you're updated (including DirectX 9.0c.) If that doesn't work, try going about the mercenary scene differently. There are a few different videos (it might just be two, though, I don't remember) that can play depending on what you do.
You could always try reinstalling the game, but I'm not sure if your save file would still work