Are you overclocked properly? BIOS version?
Can you please report which revision of the 965P-DS3 you have? There appears to be more than one. It will be marked on the mobo in a corner.
Did you make or buy the HTPC?
The audio/video drivers and codecs seem correct.
256MB of ram on your video card is minimal for quality video playback and gaming.
I also suggest that a 1.86GHz CPU is minimal for video processing, even at 2.1GHz.
A Quad Core or even a Duo Core at higher frequency would certainly be a better choice:
GIGABYTE - Support&Download - Motherboard - CPU Support List - GA-965P-DS3 (rev. 3.3)
My system has an E2180, which overclocks quite well to 2.66GHz and I keep there as it greatly improves the performance in WMC and other apps. At 2.0GHZ
HD video gets choppy.
That being said, let's take a closer look:
Two things jump out at me:
1) The E6300 @2.1GHz, which means your system is overclocked.
2) The F13X, 3/26/2008 BIOS
Before I can proceed, I would like you to run two Utilities, I originally found them at Tom's Hardware and at CPU3D. I use them as they provide system data that can be helpful in troubleshooting performance issues.
A) CPU-Z
CPUID
B) CoreTemp
Core Temp (32-bit) - Free software downloads and software reviews - CNET Download.com
Both of these utilities do more than noted by their names.
Use CPU-Z to report back here the frequency your RAM is currently running at. Of particular interest are the memory and SPD tabs. Attaching screenshots would be great! The specificatiosn page for your mobo notes support for DDR2 800.
I am also interested if your FSB is clocking down at any point, which can be found with CPU-Z...leave it open while you run heavy tasks and also when idle. Attaching screenshots would be great!
Core Temp will list FSB, stepping, and of course temps - test under heavy continued load. Attaching screenshots would be great!
Intel's Core 2 Duo and Extreme processors - The Tech Report - Page 16
It is interesting to note that Intel's E series of processors are Energy Efficient processors Exxxx, vary widely in their performance, but have similar cost structures.
Guide to Intel Desktop Processors