My project on the timeline is not playing, the cursor is moving, but the shots are still. I only see movement when I switch to preview, which you can't edit from preview.
The snapshots on the time line are not supposed to move and show you the video. They are just to help identify where you are. You don't really even need to have them there. As your curser moves along your video on the time line you should see it playing in the preview window, which is entirely separate from the time line. If you do not see a preview window then do as recommended above and go to <view><preview> and make sure it is checked. If it is already then you have hidden it somewhere. Check and see if you have a tab labeled preview and click on it. Its possible you could have moved it off the monitor. You may need to hold 'control' while rebooting Vegas to reset to factory settings (WARNING- any custom settings will be eliminated)