HD Stuttering / Intel IG35 WDDM 1.1 Driver

I have an HTPC with an Asus P5E-VM HDMI mobo with IG35 onboard graphics and a E8400 Core 2 Duo 3 GHz CPU with dual boot Vista 32bit and Windows 7 32bit setups. HD works OK under Vista 32 bit using the latest Intel Vista driver but it struggles under Windows 7 using the WDDM 1.1 driver automatically installed by Windows.

The stuttering is fairly random but occurs very frequently and most likely due to the CPU maxing out under HD resolutions (as I assume most of the graphic processing is being done in software). When I look at CPU performance while displaying HD, it shows that the CPU is working very hard. If I set the screen resolution down to 1024x768, it copes OK.

Should there be some hardware graphics acceleration with the onboard GPU under the Windows 7 driver or does it have to rely heavily on the CPU? I don't understand why my CPU is not coping as it's a good spec. Are there any tweaks or settings that would improve things? I cannot understand why performance under Vista should be better than under Windows 7.

If I can't get it to work properly, I might have to put back in my noisier HD 4670 512Mb GDDR3 card to take the load off the CPU which I shouldn't have thought to have been necessary.