The only true way to test a power supply would be to use the very expensive diagnostic equipment used in labs. But for us regular folks: I tested my power supply by hooking up my (analog) multimeter to the PCI-E dongles that I used to connect my GTX260 (I used a spare pair from the power supply while I was testing). I then observed the meter while I used the computer, first watching the voltage, then the amps, to see if there was any drop-off or erratic behavior while booting or using the computer. My reading were rock solid. So I declared my power supply good.
I spent uncountable hours trying to correct my TDR problem with bluescreen crash using a GTX260 after installing Windows 7 (TDR = Timeout Detection & Recovery = "Display
Driver Stopped Responding and has Recovered"). It turns out that the video card was bad. The strange thing was that I was using it without problems in the same rig for 9 months with XP-SP3! After doing countless diagnostics I finally bought a new GeForce 9500GT card for $50 to use while I RMA'd the GTX260 back to EVGA. Installing the 'new' card ended all my video problems. When I got the replacement card back and installed it there were no problems. Both cards use the same nVidia
Drivers.
So my advice is to not rule out a bad card. Ultimately that is what you may be dealing with.