When should "Use FFDShow video decoder for post processing" be ticked, or is it better to just leave it unticked?
Is this setting a possible problem setting?
Absolutely. That is an advanced setting that is certainly best left for "if you know what you're doing". It is absolutely not enabled by default.
What it does is route all video through the FFDSHOW filter in order to allow you to use FFDSHOW's advanced filtering methods (sharpening, rescaling, color correction, etc) even when FFDSHOW isn't being used to decode the video. It adds an extra stage into the decoding pipeline.
Now, normally it shouldn't cause blank display if it got accidentally turned on. You must also have some odd settings in the FFDSHOW decoder dialog (or a conflicting video card driver). I'd suggest resetting the FFDSHOW Video Decoder back to it's defaults. If you use CCCP you can do this through the CCCP settings application -- just check the "Reset All Settings" checkmark on page two of the dialog and click Apply.
You may want to also update your Nvidia drivers as well, if you haven't done that in the past two months or so.
Glad you got it figured out though!