I also had the same issue, as it seems do a lot of people on the oneplus forums. I discovered on my device at least that I can play video just fine, as long as I go into Settings -> Select Player (Select player as file extension) and choose which player to use, either "Stock Player" (which is hardware?) or "Software Player" - the crash only occurs if it is set to "Default" which of course most are by... default :)
I tried it both ways, with both an .avi and an .mp4, both started to play OK in both hardware and software. I cannot say if it will work with all file types, and I haven't watched any video all the way through yet to confirm no further issues.
But it looks like the bug must be in the code for working out which player to use, if it's set to "Default"!