Found a sample with source code of the broken character models/misplaced vertices

[Jason Green]

The SkinnedMesh sample from the dx8.1 sdk is broken in shader mode,
but you have to change the caps to get anything to show up.

In directx.c, I set MaxVertexBlendMatrices to 4 and
MaxVertexBlendMatrixIndex to 0 (to match to caps of my machine in
Windows), then launched the sample and switched to Software mode, then
Shader mode.  (if you go straight to shader mode, it crashes - yet
another bug.  ;-)

It results in a broken animation and misplaced vertices like many
games have been experiencing:

http://www.cmhousing.net/wine/skinnedmesh_broke.png

We finally have a simple sample to experiment with which, when fixed,
should fix the broken models in most newer games [hopefully].