I have had this same issue and been working on fixing it for several weeks. I've done the "dummy" video and found that it only works for about 2 mins and the rest of my video is screwed up. How long exactly are your dummy videos? are they the length of the actual video itself or just like 30 seconds. I've been making about 5 minute videos and found the dummy video to be useless, as well as killing all applications. Also in the running services section I noticed that the free MB is usually about 60-65 mb, but I still suffer the sync problems. I just wish Motorola would focus on its screwed up phones before moving on to Droid X
Don't worry about it. I've been on a Froyo rom for about a month now (CM6), and the pixelation problem appears to be completely gone. Non-rooted users should be getting Froyo starting next week.
Originally Posted by BrianDiddy