Fix! Here's what I got. It's pretty much the same as the dialog that pops up asking if you can see the software, but it's quicker!
Exit the Zune software
1) Start->Run->regedit
2) Navigate to HKEY_CURRENT_USER\Software\Microsoft\Zune\GeneralS ettings
3) Right click and click New->DWORD Value. Name it ReevaluateVideoSettings
4) Right click again and create a new DWORD Value. Name it UseGDI.
5) Press enter, then right click it again and click Modify
6) Change the Value Data to 1. It should be hexadecimal by default.
Restart the zune software. It worked for me!
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