Same here!
In my case, I have 'google-analytics.com' in my host file as 127.0.0.1 ... and am in no way going to change that!!
I uninstalled ver. 3.4 and re-installed ver 3.3 and got rid of the problem, but it kept asking me to download the latest version. Since I thought I had messed a setting during the original 3.4 version installation, I went ahead and moved again to ver 3.4, being very careful during the installation process as not to install any 'filler' apps.
To no avail.
the problem came back; if I don't click any of the options in the pop-up window before the video starts playing, I lose all control of mouse and keyboard, and can only do ctrl-alt-del to bring up Task Manager and kill the KMP process... what a shame!
Oh yeah, I'm using Win7 with all updates current.
Hopefully someone can come up with a solution to this problem; going back to v.3.3 in the meantime.