Blu-ray transcode to H.265 using Intel Quick Sync Video
Wrong container format (MP4)

I omitted the information about the container format. I used MP4 in preliminary tests in an effort to increase compatibility with portable devices.

It did not cross my mind that this would be the cause for the missing audio in PowerDVD 17 Ultra player. So the container has been changed to MKV. It did not, however, change anything on the artifacts in Media Player Classic - Home Cinema.



Probably buggy implementation of Native DXVA2 in Media Player Classic - Home Cinema

Thanks to Mulvya, we have found a work-around (not a solution). It seems to be buggy implementation of Native DXVA2 in Media Player Classic - Home Cinema. Switching to Video Mixing Renderer 9 (renderless) works well.