Up until recently, I had almost exactly the same setup. Same video card running Media Center on a SD 32" TV.
The only issues I had, were with Netflix. Whenever I would switch to Netflix, it would become windowed instead of fullscreen. I was, however, able to modify the registry to fix that issue.
Are you running a single display? As in the TV only? ...or is Media Center messing up the resolution on your other display?
I just did some checking and I found the registry file that I used to fix the issues I was having. I'm not sure what resolution you are running your TV display at, but I found that 800x600 worked the best. Then I applied the registry settings below to address the above issues.
Windows Registry Editor Version 5.00