Rightio, so it was time to upgrade the main pc (now an i5 2500 :-D) so the HTPC is now an AM3 Phenom II x3 @ 2.8Ghz and 4Gb ram. Cpu utilisation while streaming ESPN HD to the office and watching Sky Sport 1 HD is now at 30% max usage... Much better. However the system is still dropping frames quite badly. I'm using the LAV filters on the ATi 5450 but the block pixelation is still there and it stutters. When the pixelation isn't there it is great, but again it still stutters.
The Office pc with a Radeon 5770 and the i5 is smooth as butter, but still suffers pixelation on the 1080i streams. I can't imagine the HTPC is struggling for CPU horsepower now, so will the GPU be the bottle neck?
Shift-1 with LAV enabled shows massive frame drops but I don't know why the picture is sometimes pixelated and sometimes not. It also happens with DVBlogic in Windows Media Centre using Acamd and DVBLogic TV Source.... Confused I am! Any help would be appreciated!
Edit: Forgot to say that I'm going to try the 5770 in the HTPC and see if that makes it smooth... Try and see if the GPU is the problem.