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The effect of turning the filter off is a rougher looking output. If you can, you should keep the loop filter on, however on slower systems it can have quite an impact on HD video - that's why there is an option to disable it only for HD video. Setting the number of decoding threads to the number of "cores" that the processor has, makes a big difference with HD video.(the difference between this and hard frame drop is that these discarded frames shouldn't make too much difference to the video, however those tossed by hard frame drop may be key frames, meaning the playback could descend into gibberish if too many frames are discarded) Allowing frame drop will let SMPlayer throw away some frames if necessary to "catch up" on slower systems.
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(don't be tempted to go a step further and choose "realtime" as this will devote more or less ALL time to video playback, at the expense of Windows itself - you might be able to watch the video but you'll have a hell of a job interacting with the user interface.) Set the process priority to High to devote more time to video playback.
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