guys ... i found this thread while searching for dvd playback grainy on google, and i need to reactivate this thread. i'm experiencing similar symptoms with my new machine. with my old hp laptop and computers before that (all non 1920x1200 resolution) ... i could play my dvds on my pc without anything being grainy or pixelated! however now, with my quadcore q6600 machine, with nvidia card (GeForce 8800 GTS 512), 4 gigs of ram, and vista 64 bit OS i get the grainy pixelated playback from my pc. i've been using the same software to view movies, which is cyberpower dvd (got cyberpower dvd 7) and the playback is awfully grainy.
i am up-to-date on my video card drivers, so i don't think that is the case. is it something with the resolution i am watching my dvd in? another thing ... i backup my dvds so that they stay in good shape over time, but honestly the grainy pixelated images turn up in my .iso files (burn copies) as well ... this has never happened before, and its starting to frustrate me.
The next two suspects would be Drivers - (I know you said they were new....) or the application you are using to run the discs. It's possible the installs were slightly corrupted. Honestly tho, based on your description I'm leaning towards the drive.