I've seen the same thing. It appears to depend on the DVD. I have some DVD's which have the same problem and some that don't. On some movies I belive it may actually be film grain from the original film. For example AI is intentionally grainy, and in my opinion looks terrible.
Mine does the exact same thing. Throw in a movie like A Bugs life and I bet it'll look great. I think it's just cause the stuff in background on film is not in focus. The stuff in focus which is in the front or foreground looks good becuase it's in focus. It's most likly the DVD and not your gear. I've noticed that if I play those same movies on Laptops I get the same results. Even if you play the same movies on a TV and get really close and look closely you'll probably see the same thing.
What video card are you using? I have an Nvidia chipset card and am starting to believe part of the problem is the 8bit graphics and when seeing background images or the sky where there is a gradient pattern I see blocks...
I'm about to get a 10 bit card ati 8500 or the new matrox card. I hope this corrects my problem. Although some DVD's do this crap... i don't think it should be as bad as i've been seeing. Even the sand in the pod racing scene in Star Wars I I see too much blockieness/grain.... again... looks like it could be an 8bit issue.
I've researched them quite a bit the past few days. While not being able to try some of these other players, I've come to the conclusion that there are other players that can reduce these DCT artifacts we are seeing. Some people call them halo's... some call them a gradient problem caused by 8bit gfx. The proper name from what I can tell is "DCT artifacts". This happens mainly where there is sort of a gradient color in a diagonal fassion.
Some of the players mentioned are TheaterTek and Sonic CinePlayer 1.5 . I've seen samples of CinePlayer and there is quite a reduction of these DCT artifacts.
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