Okay-- so call it what you want-- washing out crushing, etc.. Here's what I'm seeing.
I have the xbox connected to a new Samsung LED D8000 TV using High-Speed HDMI Cables. Set to Movie mode with all the dynamic contrast & dark tones disabled. The XBOX is set to HDMI Color Space of YCbCr709 & Reference Levels set to Standard... Although, If I set to RGB and put the TV on HDMI Black Level = Normal & re-calibrate, I get the same results.
All playback examples are done using the AVS Calibration Basic Settings MP4 as shared to the Xbox via Windows Media Player Sharing and played through the XBOX Video Player. (Same results when played through Windows Media Center Extender as well)
So, the below pictures happen regardless of if I force YCbCr or RGB at the HDMI ColorSpace Settings.
The first pic is of a clean XBOX Boot, then launching the video:
The second pic is after that, I launched Gears of War 3 game (the same could be show when launching HuluPlus or NetFlix as well), exited the game, then went directly back to the Video Player and launched the video again.
The last pic is what I see immediately after I close the video player playback, and re-open it.
PS - This was the only way I could get you what I was seeing. Sorry it isn't as fancy as the way others are doing it.