I Updated to SP2 and like many people had problems with certain programs and
issues. I recently fixed some of the issues I was having and then was prompted
most recently for another update which I installed and now all of the swf's I
view locally and online (and with in side of flash itself) display pixelated
and posterized. I made sure the display settings are high and they are.

How do I fix this?
Anyone else with this problem?

u r a genius,lol
I dont know how my settings got reset to 16 bit but that was it, thank you very much.
you saved a night of frustration

That would be unrelated to SP2 itself .. I've seen it being blamed for all
sorts of unrelated things. Are you using 16-bit color settings for your
display .. if so, don't .. use 24-bit or 32-bit.