Poorer video quality with new version. Please help!

[joncar]

I use videolan to broadcast a live video feed on my website. Originally i was using version 8.4b and was reasonably happy with video quality and stream, aside from some green pixeling and "ghost images" trailing my movements occasionally.
Recently i got a new PC, using Windows Vista, which has had tons of bugs in itself, but was able to still use the same version on VideoLan. Logitech finally came out with upgraded drivers to work with vista so i downloaded them for my webcam..... from then on i started getting the blue screen of death when i started my webcam to broadcast my stream. So.....i downloaded the new verion of VideoLan 8.6b and i am again able to stream. But...... The video quality is poorer and pixelated. Any ideas how i can increase this quality? Just to be clear, the quality is not just poorer on the output stream, but even on the local playback, i can see a clear difference in quality over the old version. I know this was a long post but any help would be extremely appreciated.

UPDATE: I noticed something interesting which might be related to the problem. When i start streaming, the local playback window opens ans the video displays at like 1 inch squared, and i have to drag the window open to an average size webcam display. With the older version, the window used to open at that average sized window(4"x4"?), with nice quality. This seems to me that its set to dislpay at a smaller rate and i'm just dragging open to poorer quality. Am i right?

PS- I have fooled with the different bitrates for broadcast but nothing changes. I am not a big tech guy but any response i get will be forwarded to my webmaster for further review, so dont worry about getting all technical on me.

[CloudStalker]

I know very little about streaming and such but I do know that you can change the video output within VLC to improve the quality of your local video, and who knows, it might just fix this problem you're having with the streaming videos.

Here's how you change the video output:
Preferences > Video > Output modules, check the "Advanced options" box at the bottom-right corner of the preferences menu, choose either "DirectX video output" or "Direct3D video output" (DirectX is usually best).