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In general, Wallpaper Engine is not changing colors in any way if the options on the right are disabled. The video system used by Wallpaper Engine is part of Windows and the graphics driver, so unfortunately that's where the issue is. It's likely not about the "display" color options but rather the "video" color options in the driver.
VLC uses software video decoding which we cannot legally use and wouldn't be very good for a background application due to the permanent CPU load it would cause. That's why it's not affected by the graphics driver since it doesn't use it.
PS: I don't have Radeon Anti-Lag and screen recording enabled in my GPU driver.
PS: I have the video profile set to default in the driver.
Additionally you could try using the LAV decoder from here: https://help.wallpaperengine.io/videos/lav.html which also has a control panel where you can choose between a bunch of different hardware acceleration methods. After changing the method, you have to fully restart Wallpaper Engine for it to take effect.
In general I don't see anything in the log that could be attributed to this. As long as you don't have the color options in Wallpaper Engine enabled, then Wallpaper Engine will also not cause anything to happen to the video and it's just being played as-is through the video system of Windows and the graphics driver. I believe there was someone else recently who had issues with AMD video colors so perhaps this is a new issue in the driver that just needs to be resolved, it might be worth trying older driver versions. If it turns out that there is a new bug in the driver, then this could at least be reported to AMD.
If you absolutely don't have this issue in other video applications that use hardware acceleration (like Windows Media Player) then it could also be a per-application setting in the driver, but right now we are not aware of what it is specifically so I can't tell you exactly what setting to look out for.
This is normally the best choice and should cause the least problems in general on any device or with any software. So this could really be something in the AMD driver that AMD could ultimately fix, it might be worth to try and file a bug report with them or ask them what setting in the driver might cause this.
If you haven't tried LAV from the link I sent earlier, I think it might still be worth a try and then just going through all of the different hardware acceleration systems that are supported and available on your PC. Maybe one of them works, so it may be a viable workaround. After installing LAV you have to close WE and open the LAV video options to switch the hardware acceleration method there.