Most but not all of my videos in my iTunes library (in iTunes on my Windows XP desktop, and on my iPod Touch 4th Gen running iOS 4.3.5) show inverted colours in the still preview thumbnail. They play properly, and it doesn't seem to be related to the origin of the video file. (I think it is iTunes related because it also occurred on an earlier iPod Touch 2nd Gen running 3.1.3).
iTunes 10.5.2.11, XP SP3, AMD Athlon XP 2600+, 1GB RAM. ATI Radeon 9600 series video card. Yes it is due for an upgrade.