1) Please refer to Diag.log file in the program's folder. It could give you some hints about the problem.
2) As you know - Crystal engine uses embedded codecs, while Extreme engine uses your system codecs. "Choose shots manually" interface uses Extreme engine even when you have selected Crystal Engine in Environment settings. Extreme engine works faster than Crystal engine. Thats why it is used to select shots manually.
Some technical clarifications: Extreme engine uses automatically built interface to render the video. That interface is provided by Windows API. Windows is able to provide that interface if your codecs are properly configured. Sometimes you have to adjust your codec-pack (usually you can find that settings in you codec's settings panel). Tha panel is looked something like is shown in FAQ http://suu-design.ucoz.com/forum/12-187-1