Ok So I bought an iPad and can't watch video... have I been conned?

NO! Of course not! You are just very limited in what content you can view. This is due to Apple's restrictions:

"H.264 video up to 720p, 30 frames per second, Main Profile level 3.1 with AAC-LC audio up to 160 Kbps per channel, 48kHz, stereo audio in .m4v, .mp4, and .mov file formats; MPEG-4 video, up to 2.5 Mbps, 640 by 480 pixels, 30 frames per second, Simple Profile with AAC-LC audio up to 160 Kbps, 48kHz, stereo audio in .m4v, .mp4, and .mov file formats; Motion JPEG (M-JPEG) up to 35 Mbps, 1280 by 720 pixels, 30 frames per second, audio in ulaw, PCM stereo audio in .avi file format"

Apple love to dictate formats and it is a little bit to convenient that there is little support for non-quicktime based filetypes.

You have 5 main options:

1. Convert your existing movies to H.264/mp4/mov filetype using a converter program (more coming later)
2. Download movies again in an appropriate filetype (unreliable)
3. Use a third-party app from apple's own app store to play non-supported content
4. Streaming (from PC or the internet)
5. Give in and use iTunes