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The application also used AVI video clips, which did not come along until later in the project.  Once the clips were imported, we were faced with a quandary.  If we chose to use the movie palettes, the graphics looked horrible.  On the other hand, if we chose NOT to use the movie palettes, the movies looked awful. 

A little research on Intel's site helped me find the answer.  There I found a palette especially created for multimedia applications that use combinations of AVI and graphics.  I did not have much faith that this would be the answer - I felt sure they would favor the movies to the detriment of the graphics in an application.  Imagine my surprise when I imported the new palette and found that both the movies and the graphics looked wonderful! 

I offer it up here then as a possible solution to your video palette woes as well.  I hope it helps.