I'm playing 1920x1080 MPEG2 movies in VLC 0.8.5 on Win2k SP4. When I press Ctrl-Alt-s to save a snapshot, VLC truncates the PNG file to 3071 kilobytes, plus or minus approximately one kilobyte. That corrupts the PNG, unless the particular movie frame has low detail, in which case PNG naturally compresses it somewhat smaller than 3071 kilobytes, so no truncation occurs.
I tried disabling the snapshot preview, and tried pausing before taking the snapshot, but neither helped.
If I select JPG instead of PNG, the snapshot files are fine (and much smaller), however I don't like the compression artifacts. I don't see any way to select higher JPEG quality.
I haven't tried digging into the source code to find the culprit.