"Application Preference" Will let the app/game choose what setting of AA it will use. Now older game didnt support that so they dont apply any form of AA thats why you get some jagged edges.
Now newer game might try to put some AA if you put image quality to High/superhigh whatever so if you specify some AA with the driver and the game try to add some AA afterwards it can give some weird results.
Solution: use profiles so you specify what settings to use for this particular game/app so you do it only once...
Asus P4P800DX, P4C email@example.com, 2X512 OCZ PC4000 3-4-4-8, Leadtek FX5900 w/ FX5950U bios@500/1000, 2X30gig Raid0