Daniel,
I just tried to play the HD mpg file, which I captured from my HV10 via Power Director 6.0, on another computer and it played fine so I'm inclining to think that there might be some codec problem w/ my powerDVD/WMP and in fact, the video capturing was perfectly fine.
One thing I do notice is that video capturing was NOT working well until I upped my RAM from 1GB to 2GB... Good luck!