Not-too-expensive graphics card for HD-video

I recently bought a new (IMHO, enormous) screen (samsung syncmaster p2370) for my windows-7 desktop, but sometimes it seems my graphics card (radeon x1300/x1550, according to hardware info) isn't really up for the 1920x1080 resolution... most of the time, it works fine, but when I'm playing 720p-stuff (mkv's, mostly), the image sometimes freezes temporarily or starts lagging behind with respect to the sound. First question: is this really most likely due to the graphics card in my pc? If so, question two: in what direction should I look for a new one? I'm not really into gaming, so the heaviest work it'll have to do is play HD video (1080p would be cool) on the large screen.

I've been doing some reading, and among others found the "Sapphire Radeon HD 3450 512MB", which doesn't seem too expensive... do you guess it'd suffice for my purposes? Thanks in advance!
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  1. Your current card has 128mb of memory ? I'm running a hd2400pro 128 in my htpc and had to adapt to get it to play mkv's smoothly. I use mpc included in K-lite codec pack full download. Within it , I select 'old renderer' and that solved my stuttering ,tearing issues.
    That 3450 would probably work, but you might want to move up to the 4 series for newer
    4650 ?

    ATI Avivo™ HD Video and Display Platform1

    * 2nd generation Unified Video Decoder (UVD 2)
    o Enabling hardware decode acceleration of H.264, VC-1 and MPEG-2
    o Dual stream playback (or Picture-in-picture)
    * Hardware MPEG-1 and DivX video decode acceleration
    o Motion compensation and IDCT
    * ATI Avivo Video Post Processor1
    o Enhanced DVD up-conversion to HD
    o Color space conversion
    o Chroma subsampling format conversion
    o Horizontal and vertical scaling
    o Gamma correction
    o Advanced vector adaptive per-pixel de-interlacing
    o De-blocking and noise reduction filtering
    o Detail enhancement
    o Inverse telecine (2:2 and 3:2 pull-down correction)
    o Bad edit correction
    o Automatic dynamic contrast adjustment
    o Full score in HQV (SD) and HQV (HD) video quality benchmarks

    The 3450 also supports avivo, I'm not sure, if the 4 series is any or a lot better
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