Justin, did you try switching to ROST as a test? I'm just wondering if it is something to do with how Red October is being used to generate those Thumbs, that might be related to using LAV with madVR or something like that. Also, make sure you are on the latest build of MC and disable GPU acceleration in MC's Video options.
If that doesn't help, a few tips (for both of you):
1. Try disabling S3 sleep in the computer's BIOS (usually you can switch it to S1). I have actually seen a nearly identical issue to Mr. Haugen's description on my own HTPC with S3 sleep enabled in the BIOS. You may also need to disable Hybrid Sleep in Windows 7's Power Management Control Panel (this should happen automatically, but some computers are dumb). This seems to be caused by a weird motherboard/GPU compatibility issue, that doesn't always appear depending on what specific video card and motherboard combo you have installed. If you can't find a S1/S3 switch in the BIOS, check for Hybrid Sleep in the W7 Power Control Panel and turn it off.
If this helps, and you want to get Hybrid Sleep/S3 Sleep back, try updating your motherboard's BIOS to the latest version. I had to disable it on my HTPC a long time ago, but eventually a BIOS version came out that solved it. And, yes, I'd see the issue occur even mid-playback. It was something to do with the Windows sleep trigger, not with it actually sleeping.
2. Try updating your video card drivers. This is particularly likely to help with JustinChase's issue, but it is worth checking for MrHaugen's issue too.
3. Try updating the firmware on your TV. I've seen MANY issues with HDTVs (and modern projectors) be resolved with Firmware updates. Many modern models are easy to update. For example, on my Panasonic and Samsungs, you just copy the firmware file downloaded from their website onto a USB Flash drive and plug the drive into the side of the TV, and then it'll detect it and prompt you to install the update. Older TVs (particularly Mitsubishi sets) were a pain in the butt and usually required a service tech to come to your house. In some cases, if you call customer support, they can lead you to a special website where you can download the updates that aren't advertised on their regular support website. Just call and ask if a firmware update is available for your set.
4. If you are using any kind of funky refresh rates (like 24 Hz for movies) on your monitor, try turning that off and using the defaults. I've seen plenty of HDTVs that "support" particular refresh rates, but which flake out much more often when using them than they do with the "standard" (60 or 50 depending on your zone) refresh. Sometimes, updating the firmware can make these problems go away (I've seen this personally with a Sony we had at work that would flake out at 24 Hz, and was totally solved after a firmware update).