Smartrender introduces blocky artifacts after keyframes

[Jeff7]

This appears to happen with both VS8 and VS9. I record things with a Hauppauge PVR 350, to high-bitrate MPEG2, in the 12-14Mbit range. WinTV2K only allows recordings in increments of a half hour, so if something I'm recording is 1hr, 31 minutes, I have to set it for 2hrs, so I get about 29 minutes of nothing at the end, which I want to trim off before working on the file with Virtualdub (to make use of its variety of filters).
Problem is, after Smartrendering the file (to avoid further quality loss supposedly), the resulting file will occasionally display severe blocky artifacting.

Image folder
Files are available there. The PNG and JPG images are the same, just your choice of which filetype; JPG should probably be fine.
The sequence.avi file is all 5 frames put together into a 5 second video. The AVI file is probably the best way to see the problem.

The first 2 frames are the worst, then the third starts to get better, and by the 4th and 5th frames, it looks normal. Note especially the skyline. There are some very serious artifacts visible there, but they're gone by the last two frames.


Update:
Seems that it is not just after keyframes - looks like it can happen anywhere. Link
This is a zipped file (4.2MB), containing 18 image files. Each is labeled according to what kind of frame it is. The original file did not have any visible problems in these frames, but after Smartrender, these frames were severely corrupted.

I'll try Videostudio 8 and see if it botches the file too.
Yup, VS8 does the same thing.