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Is the issue only with Avi publish or with swf publish as well. Also check the image quality settings that you have selected in Captivate.
In addition to Saurabh's fine words, one place that may be helpful to check is the properties of all slides. Look at the quality setting there as well.
Remember that you don't need to check them individually (Unless you just want to). You may select them all and look at the properties as a group.
Thanks both for your suggestions, unfortunately the problem hasn't been fixed. I have checked the quality in the settings and it is set to high, and yes the problem occurs with published SWF too. Any further suggestions? :(