
I found out the cause of this smudging problem.
Apparently I had worked earlier on a noisy high ISO video and had copied the attributes from that clip and one of the attributes, besides the LUT, was heavy noise reduction. Frankly, I am amazed that my workstation can play 8K footage with noise AI reduction applied without strain.
It really caught my attention when I used the transform to zoom out of a clip and the whole clip would turn into pastel smudge painting like a French Impressionist style. Then I said, wait a minute.. something's going on here..
So anyway, I went through all the clips on the timeline and reset the NR for each of them. No more smudge effects.