After a few months of people pointing the issue out, Microsoft has finally acknowledged that the 2011 dashboard update has created a problem with the console’s video playback.
https://lastchance.cc/analysis-alleges-microsoft-gimped-third-party-video-in-5873973%3C/a%3E%3C/p%3E
Xbox spokesman Larry Hryb has said the company is “aware of the colorspace issue” affecting “some Xbox video apps”, and that Microsoft is “working on a fix”.
Note he only seems to be addressing the issue of colours appearing “washed out”, not the other allegations that third-party video apps are “no longer being rendered in native resolution”.
“No ETA yet”, Hryb adds, “but we hope to have an update soon”.
@majornelson [Twitter, thanks Henry!]