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Most video player programs on Windows are going to use the standard windows codecs installed, which most of the time is some variation of the ffmpeg library (decodes almosy all FourCC video types, DIVX, XVID, H264 and MPEG video).
Basically WMP, Windows Media Player Classic, and almost all the others are just a front end to this library. Some might offer more tools to adjust the output of the video (contrast, color balance, etc) but the video quality and audio quality (handled also by ffmpeg) are going to be roughly the same.
VLC on the other hand has custom written libraries for all the data formats it supports. I find that its deblocking and other quality controls are a little bit easier/nicer to deal with than ffmpegs (either through a front end in a player, or through the ffmpeg control panel).
I use VLC just because I don't want to hassle with all the codec packs (but if you do I recommend the Combined Community Codec Pack, just google CCCP codec and it should be the first link).
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