I have a htpc with a e4500,2.2 dual ,4 gig memory and at one point a 8600gt, that went bad, so had to put in a ati 2400hdpro 128 meg, and that can play mkv blu ray rips. But it was a lot more fussy than the 8600, ALOT.
I use k-lite codec pack full install . That put MPC home theater on your computer, I use that to play my media files. Within the program , I had to select under options, playback , output , old renderer. With the 8600, I didn't have to touch any settings.
That card is meant to do what your asking.
when playing Xvid
cpu 27% utilization