What a dufus error message! OK, in Powerpoint you sometimes get digital garbage on video clips if you have your Display setting for video hardware acceleration turned up too high. (not kidding....well documented). So in a recent project I slid the acceleration slider down to about 30% and Powerpoint worked perfectly.
Except, little did I know that I broke eDVD! In order to correctly write the video XML file that eDVD was having trouble with, I had to slide that acceleration slider all the way up. PRESTO! eDVD is all better.
What a kludge Microsoft created in it's media management at the system level.
eDVD wants full hardware acceleration to work properly and Powerpoint likes it lowered a bit.