Thanks for the answer, very kind of you.
It was not the solution however, but I found it out. I thought I should share, maybe some player encounters it in the future.
So, the last version on moddb comes with an "exe" installer, not in a zipped folder. The installer replaces shaders optionally. But this is highlighted by default, and it seems I didn't uncheck the box.
When you have the optional shaders installed, it puts a very strange white-ish gloss/glow/aura on all units. The problem disappeared when I identified the files causing the problem. Basically I just had to delete postFX.fx and mb.fx in the 1257AD folder. (I guess a reinstall would also work, with not allowing the install of optional shaders)
Unfortunately I didn't find a solution for the "no sound during night" bug. My search only verified that it is not just me (found the same issue posted on reddit and steam forums by different players), but unfortunately no one could come up with a solution for this. This is not actually a minor thing, as for example you don't actually hear cavalry approaching behind your back, or arrows hitting the ground nearby. I actually didn't realize how much I use the sounds to identify danger, until I tried to play with this bug
edit: I re-installed so that this info is correct. So at one point, the 1257AD shader was optional, but in the last version it is not. (during install, you cannot disable it). So if someone has this problem, it seems it cannot be fixed during installing the mod, the two files should be deleted manually after running the exe.
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