OK, IANAMCS (Media Center Specialist) but here goes.
A few ideas/questions:
-Are you sure that the graphics card is the problem? (could it be a cpu bottleneck?)
-Does xbmc use the graphics card a lot? (openGL > Xv > raster) if not, see point number one.
-What are you trying to play (H264 is expensive to decode, and on linux only the NVidia Blob currently has support for gpu assisted decoding).
-What chip do you have in that card (r300: you could try the open drivers since they're faster than Catalyst under some workloads).
- It's defenatly a cpu bottleneck, hence the need to offload to gpu.
- Valid point, I might be able to reduce some load there. I'll check this out.
- There was some work with galium3d to do gpu assisted decode atleast, this is basically what I'm looking for. But I have no idea in what state it is currently.
- I think it's a R600 chip.