The only other 3D issue I can think of is running 3D apps under Compiz, where NVidia has an advantage because they didn't rely on the Linux framework and instead ported relatively more of their Windows driver stack to Linux allowing them to support Redirected Direct Rendering before Intel and AMD.
Regarding video playback, have you tried the open source drivers on your 1650 recently ? Alex put a lot of work into adding good EXA render support and Textured Video (which works nicely even under Compiz) and that is now available on both the radeonhd and radeon drivers. The only missing thing in the framework right now is a good vsync solution in the compositor but that is being worked on.
It's going to be another 6-12 months before the Linux desktop infrastructure is going to be ready to start taking on Apple and Microsoft, but there is great progress and solutions seem to be worked out for all the key parts. Again, you want to be running the open drivers to see the framework progress fastest -- while you want to run our proprietary drivers if you want to see proprietary features first. Up to you.
That said, since you are unhappy with Microsoft and (reading between the lines) Digital Rights Management, that is something different (and a different part of the chip as well). Again, though, the advances in video processing power over the last decade are pretty significant as well, although maybe only 100:1 rather than 2,000:1.
What specifically do you think we are doing wrong ?
I understand that Microsoft OSes are not your choice and we are not trying to force you to use their products.