Worked all weekend and here's the answer (I Think):
The solution turned out to be a combination of DirectX 8 and Media Player 7.1.

It may just be Media Player and not 8 but I want to run for awhile before I try to re-install 8. I uninstalled it and replaced it with X7 but also rid myself of Media Player when it was apparent that that was not the sole solution and Media Player 7.1 was installed at the same time.

Curiously when I un-installed Media 7.1, the old 6.4 immediately became active again which I had thought was overwritten. I took the old Goodtime.mpg file from MS Win95 and played it with 6.4 on my wife's machine, full screen, no problems. Then I installed 7.1 and played it and it skipped and distorted the image and audio match up.

I uninstalled 7.1, 6.4 reappeared and played the file perfectly.

If you have problems as I had you may want to check into Media 7.1 as the culprit. As I said I want to run a little while then re-install DirectX 8 without 7.1 and see what happens.

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"Finest Kind"