Microsoft is following up on complaints that its "Metro" overhaul for the Xbox 360 Dashboard has negatively affected video playback, resulting in reduced picture quality and washed out visuals.

Today, company spokesperson Larry Hyrb (aka Major Nelson) announced a solution is on the way, tweeting, “We're aware of the colorspace issue w/ some Xbox video apps & are working on a fix. No ETA yet but we hope to have an update soon.”

Microsoft's acknowledgement should come as good news for Xbox 360 movie buffs, however some argue the company is ignoring an even bigger issue – that the current update imposes quality restrictions on any non-Zune content. Earlier this month, Eurogamer confirmed allegations the Metro upgrade had reduced the maximum video playback quality for all non-Zune videos to 720p, while allowing for full HD 1080p quality for content played through its proprietary platform.

Metro beta tester Jeremy Anderson said the issue was identified, but largely ignored by higher-ups, recalling, “I reported that 1080p scaling issue as a bug on the first day of the preview program and had a pretty good number of votes behind it before Microsoft deleted it without response...I'm assuming they know and don't want to acknowledge it, much like the video level issue."

It's understandable why Microsoft would give preference to its own platform, and it isn't the first company to do so by any stretch. Downsampling non-Zune content to do so, however, isn't likely to win any fans. Let us know if you've noticed the difference, and if so, what you think about Microsoft's upcoming fix.