WM12 strange video playback problem.

Hi, wonder if anyone could shed any light on this. Trying to play video files in WM12 is giving terrible results. It worked fine when freshly installed earlier in the week. However, this is the result I am now getting. Horrible jagged edges and the image seems to be sharpened and colours distorted. Playing the same video in VLC (1.0.3) sees the video play as normal. However, I'd like to use Windows Media Player, so would be much obliged if someone could offer a solution.

Have you installed Codecs or anything else?

DivX Codec and VLC

My system is as follows:

Gigabyte GA-EX58-UD5
Intel Core i7 920, 4000 MHz (21 x 190)
6GB Corsair XMS3 CM3X2G1600C9
ATI Radeon HD 5870 1GB (Catalyst 9.10)
Windows 7 Home Premium