I've assigned Processing Profile with Video and Image Profiles to the folder where assets are stored.
Also I've tried to restart instance, restarting bundle for Dynamic Media.
The problem is when I trying to configure Dynamic Media Component on a page I can't choose anything from Viewer Preset (see screenshot attached). Behavior is the same for Classic and Touch UI. However I see lots of default Viewer Presets in Tools > Assets > Dynamic Media Settings. How to use them on a page?
To deliveran asset with a viewer preset, you must replicate/publishthe viewer preset. (All viewer presets must be activated and replicated to obtain the URL or embed code for an asset.) See Publishing Viewer Presets for more information
about the error log posted, something was wrong with the steps taken because something is null - you can check in jcr or else in config:
libs.dam.components.scene7.dynamicmedia.dynamicmedia$jsp Unable to save imageserverurl and videoserverurl java.lang.NullPointerException: Value should not be null (key = assetType)
The major part where I've got an issue (I guess) is that you need to drag&drop only video or image that is already published to DM into the Dynamic Media Component, so maybe it will also solve your issue.