It looks fine in Vegas on other computers? Looks like it may not be decoding properly?
Please share MediaInfo for it: https://www.vegascreativesoftware.info/us/forum/faq-how-to-post-mediainfo-and-vegas-pro-file-properties--104561/

Thanks, I did a clean install of the studio driver but still had the same exact problem.

Then I realized that under file I/O in preferences, the hardware decoder to use is listed as "QSV on Intel Iris Xe Graphics". I can manually switch that to "NVDEC on NVIDIA GeForce RTX 3070 Ti" and that fixes the issue. But then the question is why is the QSV decoder doing that? I did a few tests and using the QSV encoder during rendering gives me the quickest renders so I'm wondering if I would get the best timeline playback using the QSV decoder. I do have the latest QSV drivers installed and I'm using Vegas 19 build 643.

@RogerS

Here's the MediaInfo for most the clips in my project

General
Complete name                            : E:\(4-29-22) Bridget & Nicholas\Media\Video\FX3_ONE\FX3_ONE_20220429_0001.MP4
Format                                   : XAVC
Codec ID                                 : XAVC (XAVC/mp42/iso2/nras)
File size                                : 64.3 MiB
Duration                                 : 9 s 510 ms
Overall bit rate                         : 56.7 Mb/s
Encoded date                             : UTC 2022-04-29 20:18:26
Tagged date                              : UTC 2022-04-29 20:18:26

Video
ID                                       : 1
Format                                   : HEVC
Format/Info                              : High Efficiency Video Coding
Format profile                           : Format Range@L5@High
Codec ID                                 : hvc1
Codec ID/Info                            : High Efficiency Video Coding
Duration                                 : 9 s 510 ms
Bit rate                                 : 50.1 Mb/s
Width                                    : 3 840 pixels
Height                                   : 2 160 pixels
Display aspect ratio                     : 16:9
Frame rate mode                          : Constant
Frame rate                               : 23.976 (24000/1001) FPS
Color space                              : YUV
Chroma subsampling                       : 4:2:2
Bit depth                                : 10 bits
Bits/(Pixel*Frame)                       : 0.252
Stream size                              : 56.8 MiB (88%)
Encoded date                             : UTC 2022-04-29 20:18:26
Tagged date                              : UTC 2022-04-29 20:18:26
Color range                              : Full
Metas                                    : 3
Codec configuration box                  : hvcC

Audio
ID                                       : 2
Format                                   : PCM
Format settings                          : Big / Signed
Codec ID                                 : twos
Duration                                 : 9 s 510 ms
Bit rate mode                            : Constant
Bit rate                                 : 1 536 kb/s
Channel(s)                               : 2 channels
Sampling rate                            : 48.0 kHz
Bit depth                                : 16 bits
Stream size                              : 1.74 MiB (3%)
Encoded date                             : UTC 2022-04-29 20:18:26
Tagged date                              : UTC 2022-04-29 20:18:26

Thanks, I did a clean install of the studio driver but still had the same exact problem.

Then I realized that under file I/O in preferences, the hardware decoder to use is listed as "QSV on Intel Iris Xe Graphics". I can manually switch that to "NVDEC on NVIDIA GeForce RTX 3070 Ti" and that fixes the issue. But then the question is why is the QSV decoder doing that?

Your Nvidia GPU isn't using it's GPU decoder, because it can't decode 4:2:2 color HEVC, but your Intel IGPU can, so it's faulty GPU decoding. Either a Vegas bug or bad drivers. Open your task manager go to performance, click on your Intel IGPU, play back the video with media players or other NLE's. If any support GPU decoding of that file you'll see it in the decoding graph. If it looks fine, it's probably a Vegas Bug. Report it.

I only have 1 GPU decoder in my machine, not sure how it works with media players etc when you have 2, as in what they default to.

I'd try different Intel drivers and see if it helps. Keep decoding set to Intel QSV as the NVIDIA one will just drop back to CPU for all the file types it doesn't support, including this one.