Microsoft has today confirmed that it realises there may be issues with the colour output of video playback since the recent 360 dashboard update.
Major Nelson tweeted the following; “We’re aware of the colorspace issue w/ some Xbox video apps & are working on a fix. No ETA yet but we hope to have an update soon,” he wrote.
The new update is making videos run and a limited RGB range of levels. This results in colours looking washed out and blacks looking like greys.
It also seems that the recent update was taking 1080p video files and downscaling them to 720p.
Nothing has been said as to when Microsoft will correct the issue, we hope it will be soon.