Hi Lord of Minor!
I think that you might not have GPU converter software from ATI (called Avivo Video Converter)installed: ATI Radeon
If u wanna check, just right click desktop and click on Catalyst Control Center, then go to Video Converter from top-left menu. Over there, if you see "Start Video Converter" button then you have it installed else not.
You need to install Avivo package from above link for GPU video converting to work.
Hope this helps!