Thumbnails ...
Make sure FFDshow is selected on the righthand side of the H264 TAB...
Then you need to clear your thumbnail cache by utilizing the Disk Cleanup Tool - to find it, navigating the startmenu
Accessories | System Tools | Disk Cleanup
The tool defaults to your Windows Drive, click OK
In the next window that appears, be sure the box next to Thumbnails is checked, press OK
Reboot your system