I have the exact same experience and I see in various forums that others have the same, for instance also World of Warcraft players, after updating to 10.6.8.
I followed all suggestions in other forums, updating the nVidia card, deleting the user settings, trying out alternative viewers, creating a new avi, getting rid of "ruthhairfix", reconnecting the router......... nothing helps.
It must have to do with the 10.6.8 update since it happened for everyone after updating. Why it doesn't affect everyone I don't know. But it did for me and now I miss SL!!!!!