knife tool not working I am learning how to use the Knife tool and it's not working for me. I try to make a straight line by clicking on two points with Left mouse button, but the second time I click it, the line disappears.
I am trying to cut a diagonal line in the small box on right.

Please find attached blend file.

I tried to attach a Blender Screencast but it doesn't allow me to upload avi files, could you please tell me how to do it?

PS While you are at it, could you please check why my vertex snap (or any snap for that matter) is not working when holding down the Ctrl key? I am following a video tutorial and it's supposed to snap at all the corners, but it's only snapping in one or two places. 
Thanks
The reason why your knife tool is not working is due to the fact that you have multiple polygons on top the same surface area. What I did was ... I made sure I "removed doubles" by hitting the W key and chose "remove doubles". After which the knife tool works.

As for your screencast, the site blender.stackexchange will only accept .gif files. You can use Screen 2 Gif software to capture the gif but it has to be below 2mb , if you want to upload via stackexchange's internal upload interface. Or else you would have to upload your gif to an external site and add the link to your post.