There you go!
Encore must see this layer. In fact, my experience was that it must a) be called background (and visible and locked) and b) you can't put a background layer over it if you have motion. When it is a still bg, it works fine. But when there is motion, Encore replace "background" layer with the motion, and if there is another layer on top of it, that (the still) is all you see, even though Encore believes it is motion.
Good catch, and thanks for reporting your results.