cheese video quality seriously degraded: appears heavily interlaced in black & white with red artifacts

Cheese running in non-debug mode shows terrible video quality:

- it's in black and white
- lots of noise in the image
- lots of red artifacts which are overlayed over the main image, but offset and heavily interlaced.

When apport runs cheese in debug mode, the picture quality is perfect as it is with mplayer:

  mplayer -tv driver=v4l2 tv://

ProblemType: Bug
DistroRelease: Ubuntu 11.10
Package: cheese 3.0.2-0ubuntu2
ProcVersionSignature: Ubuntu 3.0.0-11.18-generic-pae 3.0.4
Uname: Linux 3.0.0-11-generic-pae i686
NonfreeKernelModules: nvidia
ApportVersion: 1.23-0ubuntu2
Architecture: i386
Date: Thu Sep 29 14:35:07 2011
InstallationMedia: Ubuntu 10.10 "Maverick Meerkat" - Release i386 (20101007)
MachineType: LENOVO 2516CTO
ProcEnviron:
 PATH=(custom, user)
 LANG=en_GB.UTF-8
 SHELL=/bin/bash
RelatedPackageVersions:
 cheese 3.0.2-0ubuntu2
 cheese-common 3.0.2-0ubuntu2
SourcePackage: cheese
UpgradeStatus: Upgraded to oneiric on 2011-09-25 (4 days ago)
dmi.bios.date: 08/27/2010
dmi.bios.vendor: LENOVO
dmi.bios.version: 6IET72WW (1.32 )
dmi.board.name: 2516CTO
dmi.board.vendor: LENOVO
dmi.board.version: Not Available
dmi.chassis.type: 10
dmi.chassis.vendor: LENOVO
dmi.chassis.version: Not Available
dmi.modalias: dmi:bvnLENOVO:bvr6IET72WW(1.32):bd08/27/2010:svnLENOVO:pn2516CTO:pvrThinkPadT410:rvnLENOVO:rn2516CTO:rvrNotAvailable:cvnLENOVO:ct10:cvrNotAvailable:
dmi.product.name: 2516CTO
dmi.product.version: ThinkPad T410
dmi.sys.vendor: LENOVO