Hey lobo, you need a solution to try. I need someone to try solutions I read somewhere in the web (since I don't have Windows 7). Why not trying to join our forces?
I suggest you to try these, in order:
1) use your current catalyst, activate Theater Mode, try to play a video with Media Player Classic. Someone say to have Theater mode working on Windows 7 using MPC. "You will need to choose Overlay Mixer" not VMR, he said. So let's do it: open MPC > View > Options > Output > Overlay Mixer.
2) if it didn't work, install an older CCC (e.g. 9.8) and retry. You can later upgrade your video drivers without upgrading CCC, which is not needed.
If you need more help about that, just ask.
Please, let me know if you try and it works\doesn't work.