DVD problem

whenever i play dvd movies, the image seems pixelated and the colors and very baaaaad! To resolve this, i have to turn hardware acceleration down to disable direct 3d and direct draw. Can anyone tell me what is wrong with this? i tried using different dvd players but still doesnt work.
I have updated drivers and windows pathces and i'm using Direct X 9c.

AMD64 3Ghz
MSI FX5700
1024 x 768 (75hz)
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  1. DVD in your computer or is this an external DVD player you're using?
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DVD Windows XP