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?
Edit:
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
[HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Media Center\Settings\DisplayService]
"PhysicalWidth"=dword:00000320
"PhysicalHeight"=dword:00000258
"LogicalWidth"=dword:00000320
"LogicalHeight"=dword:00000258
"Format"="RGB32"
"TvMode"="On"
"RefreshRate"=dword:0000003b
"Interlaced"=dword:00000001