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Same problem, just downloaded VLC 1.1.7 (zip file) for WinXPSP3 and tried to associate all video extensions to VLC, upon clicking apply, VLC is gone. Tried several times, same result. Apply=crash.
Bug report (assuming this is definitely not a feature)?
(I am fairly new gto VLC, so I am not familiar to the "rules" of submitting bug reports).