Screen tearing with HD 3870

I know this issue has been discussed several times, but I have searched the web up and down, especially this site, and have not found a complete resolution to my issue. Let me first start with my specs:

Windows XP SP2 32-bit
Core 2 Quad q6600 2.4GHz
4GB Memory
Sapphire HD 3870
latest and greatest ATI drivers and CCC
500W PSU with 7 case fans
5 hard drives (althought issue was apparent with 2 drives connected also)

So, with this new setup I recently acquired, I started getting into the HD playback world, especially since I have a 46" Samsung HDTV. I started noticing this issue on my 19" monitor even before I physically connected it to my TV, so I know there's not an issue there....

I started out using VLC since it seemed to be the most popular and easy to use. When playing an mkv file (1080p or 720p), it had a lot of screen tearing (I didn't even know the proper term for it until it happened and I started researching it). I thought it was a difference in frame rate vs. refresh rate, so I went to connect it to my TV (120Hz capable) via DVI to HDMI and it's the same outcome. During any kind of fast movement, doesn't have to be extremely fast movement, there will be tearing as if something isn't syncing.

I read some forums and tried messing with V-Sync, didn't help. I installed ffdshow, but didn't really understand it so I just forgot about it. I installed other Media Players including MPC and it was tearing in all of them. I installed ReClock and set other media types force: 23.976fps, since that's what the mkv's are recorded in, and opened VLC and nothing changed. I opened MPC (and noticed ReClock opening in my system tray when opening MPC), and it works almost flawlessly. I only notice tearing with extremely fast movement and bright colors. I tried BS Player, and it looks like MPC, but I prefer it over MPC just for the better looking interface. BTW, CPU usage is 1 - 2% during video playback which I'm wondering about, but maybe that's just benefits of quad core...

So my question is, is there something I need to do in VLC to get it working like the others and is there something else I can do to try to remedy the tearing all together? I'd like for it to play flawlessly in any player. I have Logitech z-680 speakers connected to the PC via 6 channel direct, so all media players can send all 6 channels and I'll let the player decode it, but just wondering what else I can do and which media player could potentially make these HD quality videos look the best on my system. Thanks a lot!