In my case, I can Watch Instantly for an entire movie, in HD, without any trouble at all, and it does start almost instantly.
If you're getting the bone, though, that points to the limitations any bandwidth-intensive business has to contend with as they scale. A decent number of potential customers are stuck with sloppy internet. I wonder at what point Netflix's growth becomes inhibited by the shitty state of US ISPs.
More interestingly, I wonder what moves they'll make to get around those limitations. They are a crafty company.