We've used the codec that - accordingly to what Google says - works on every Android 2.2 or higher. But looks like it doesn't so we just need to wait until Google releases some improved codec.
Regarding the app exiting - it goes hibernated when exiting. However, when hibernated, it doesn't consume the battery power at all. That's why it takes you back to the exact moment you were playing when you exited the game.
(if you need more memory resources for any purpose, and the hibernated game uses too much, the system will shut down the game automatically to gain needed memory space).