I have the exact same problem except mine can show 4 or more posterized colors at times.
I'm using WMP 9.
I have had Windows.Media.Video 9 VCM v6.5.4019.0 codec installed for a long time.
Yesterday I installed the Combined Community Codec Pack. It is a barebones pack, includes ffdshow.
It did not help at all. I sure hope someone can help.
Edit - Was searching for info, came across an MS tips page.
It says to try playing file with mplayer2.exe.
It is WMP v6.4 and is in the same folder as the WMP 9 exe.
I had saved some stream files using Replay Media Catcher.
The files that are posterized in v9 play perfectly in v6.4 !!
The files also play fine with Media Player Classic.
If only I knew how to make web streams play with the old WMP 6.4 or MPC all would be solved.
Edited by lokiman, 27 January 2009 - 06:33 PM.