We recommend installing K-Lite Codec Pack:
http://www.free-codecs.com/download/k_lite_codec_pack.htmDuring installation whenever there is a choice between ffdshow and another codec (like DivX or XviD) always choose that another codec. In other words install ffdshow but use it only for those formats where there is no other available codec.
For lossy compression we recommend using DivX, Xvid or x264. For lossless - Lagarith, or if you want VLC compatibility Huffyuv.
VLC player has a limited number of built-in codecs, so some codecs are not supported by it.
About warping effect: is it seen in Preview mode? If yes, the problem is with decoding. If not, the problem is with encoding.