@ Snowcrash: Unfortunately, I can't use MPC HC to make my GPU decode video [aka DXVA - DirectX Video Acceleration] because my GPU is GeForce 6600. I need atleast Geforce 8 series or Radeon 3xxx series in order to get that magic working!
I read the article at Guru3d.com: Accelerate x.264 1080p movies over the GPU Guide
@ Mr.Grim and Snowcrash: I am glad to see that you dont have the problems that I have!
and @ NosferatuX: Thanks dude!
From what I can gather, the problem, atleast for now, seems to be my GeForce 6600.
I will be removing my graphics card and trying out my onboard GMA 950 to see whether it has the same problems.
I also tried switching off Aero by changing to Basic theme but the isse remains.
I would really appreciate if someone with a Geforce 6 series could confirm whether or not they are facing a similar problem!
Thank you all, for your replies!
This community is great!