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I also will confirm that capturing to external hd's is fine. I have multiple external drives connected through a firewire hub and never have a problem.
You might want to try to transfer the clips to another pc and see how the play in their installation of WMP or any other app. The clips may appear weird on your pc only. Could be a issue with video codecs installed or missing on your omputer. You might want to download a codec package and reboot, see if the avi clips play properly then.
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