Balders1:I finally figured out what's causing the problem. It seems that the pause (windows) and flicker (full screen) only happen when the Catalyst Software has anti aliasing switched on, or "3D Settings" set above "Balanced".
If I use Quality 3D settings, and then start VMC I get the problem. If I reset to Balanced 3D settings then restart VMC, the playback is fine. Likewise if I'm in Balanced and I change the Anti Aliasing to anything other than "Application Controlled", the problem comes back again.
This explains why reloading the device drivers and catalyst software fixed the problem as it reset all the settings to default. I still can't determine if it's a problem with the Catalyst drivers, or VMC, but at least I now know how to workaround the problem.
Balders.
Excellent find.
I was having the same problem with my HD3870. Last night I reset the 3D settings to default and this strange video playback issue went away.
STB w/R5000HD USB I/O, Gigabyte GA-P35-DS4, Quad Q6600, 4.0 GB RAM, ATI HD 3870 512MB, Ultra XVS 600W PSU, 3x SATA 500GB, 2x SATA 300GB, LG GGC-H20L, PVR-250, Toshiba 51H83 (51" HDTV), Yamaha RX-V2400 Amp, 5x Energy Speakers, SVS Sub, Harmony 880 Remote