If you go to the bottom of this web page you can see what incorrect color decoding looks like.
http://www.sigmadesigns.com/public/Support/chromaticity.htmlVideos are almost always encoded using component video (YCrCb) in order to save space compared to RGB. Therefore, in order to be displayed the component video must be decoded back into RGB. The decoding standard for Standard Definition sources such as DVDs is known as BT.601 and the one for HDTV is BT.709. Therefore, you would expect the WDTV to decode HDTV video files using BT.709 unless told otherwise by flags in the source file. However, it does not. It uses BT.601.
The actual behavior is as follows:
If the video file is flagged as BT.601, then it will be decoded using BT.601.
If the video file is flagged as BT.709, then it will be decoded using BT.709.
If the video file is not flagged, then it will be decoded using BT.601.
Unfortunately, most video files are not flagged. Since almost all HDTV content is made using BT.709, then most of these files will be decoded incorrectly.
The above behavior is correct if this product were a DVD player, but almost all Blu-ray, HD-DVD, and ATSC set-top boxes act differently. They assume that all HD content is BT.709 unless the flags say otherwise.
Note that this error in decoding occurs internally before the signal even gets to the HDMI transmitter. So you cannot fix it at the display.