Thanks to everyone for their input.
I have tried installing the latest drivers
for my ATI card, however installing the Catalyst slows up the picture.
I also tried the Shark codecs but still has issue playing higher bitrate 1080p mkv files.
For now I am sticking with an older version of K-lite codec pack which was dated like 12-2008. If I go any with any later versions then I start getting the pixelation in the higher bitrate 1080p mkvs