The new Xbox 360 dashboard update was intended to completely transform Xbox 360 from a game console to fully fledged media hub, however things seems to be going in wrong direction, as reports from Digital Foundary suggest that the new dashboard have reduced the quality of video playback.
According to reports, the new Xbox 360 dashboard update forces video on console to run at limited range RGB levels. This result in washed out colours, with blacks becoming grey.
Other report also suggest that beta testers have reported this issue to Microsoft prior to the release of this dashboard update but Microsoft deleted all the threads referring to the issue and give the following message.
"Thanks for the feedback! Though we will not be able to incorporate your feedback into this release we will save it for consideration in future releases. Thanks for using the new Xbox Update and please keep up the feedback!"
Check out one of the comparison screenshot below.