ok an update.
standalone codec here. can be placed anywhere. Codec : DivX for Blizzard Decoder Filter : Shareware Codecs
open a elevated command prompt and nvigate to the directory where the codec resides.
type the following command regsvr32 blizzard.ax
you should get a popup window saying succesfully registered.
now when loading the game cinematics will work, however the first time the cinematic played it crashed the game, I then used XP compatability mode and it works, even turning XP mode off again it still works but to be safe I suggest using XP mode.
The downsides of working cinematics are that I have noticed.
1 - the gamma is too high and it looks washed out, but better than sound only.
2 - the hdmi copy protection kicks in and nvidia scaling is then disabled.
Regarding point 2, I noticed after I had working cinematics the game screen was stretched out on my monitor, after some googling it seems when using a video overlay and especially one that uses a 480p,720p,1080p resolution then software scaling is forcefully disabled to comply with copyright protection. Not much mention of it on this site but for all those who wonder why it dont work this is why.
There is 3 workarounds I discovered.
The first is here, works at best temporarily until a video is next played and requires rebooting. Why am I not able to resize the HDTV Desktop with GeForce 8 cards onWindows XP?
The second involves modifying your monitor edid in the driver
installation so windows does not recognise your monitor as hdmi compliant which should disable the copy protection stuff, I couldnt get this to work and it is far from a simple procedure, some info here. HDMI: How to disable? - NVIDIA Forums
The third is to use monitor scaling that allows non widescreen to not stretch, typically known as 1:1 mapping. My monitor does not have 1:1 but does have a 4:3 non stretched mode, when I turn this on with warcraft 3 running the affect is very similiar to "nvidia scaling with fixed aspect ratio". Slight bars at the top and bottom but not much, and the bars at left and right so not widescreen. It is annoying as I have to manually enable when loading the game and then manually turn off back on the desktop however it is a relief as I hate stretched 4:3.
1:1 and my 4:3 mode are not a proper substitute for nvidia scaling tho, the fixed aspect ratio option is quite kick ass, eg. I play fable using a lower wide screen res 1280x800 and is scaled up to fully use my monitor display, I will have to run the first workaround I listed to have that working again and it will break next time I watch a cinematic in warcraft 3.