I find that the default H.264/AVC decoder in WMP12 is superior to just about everything else from my informal testing. By everything else, I'm referring to VLC, libavcodec/ffmpeg-mt (found in ffdshow) and Quicktime. I do like libavcodec (or rather ffdshow's postprocessing) for cleaing up Xvid content and VP6 Flash Video, most of which is low bitrate stuff I have grabbed off the Internet in the past years.
I use WMP12+Shark007 Codecs. Since most content these days is H.264 to begin with, ffdshow only really steps in with myriad audio formats and the aforementioned video formats. And the configuration utility makes it super easy to switch between different decoders. For instance, for H.264 playback, I can choose between Microsoft's in-built decoder, ffdshow DXVA, ffdshow libavcodec/ffmpeg-mt, MPC-HC, DivX (with DXVA) or CoreAVC all from the same tab.
And it works brilliantly.