I have almost the same setup in my HTPC system

GGW-H20L
ATi HD3470
Cyberlink 7.3 with current update (as of 3/3/08)
AMD AM2 X2 4200
3GB DDR2 PC6400
32" 720p/1080i HDMI/HDCP compliant display
Vista 32 with all patches (but not SP1)
2x Nova-TD dual tuner USB sticks (4 tuners in VMC)

There is a marked difference between HD and DVD playback.

I know there is a bug in Cyberlink with PiP discs (I believe it shows up on some versions of Borne trillogy discs but I have never seen it on any of my discs) where the PiP code causes the program to resample down to 480i and then resample back up.

Try running Cyberlink in software mode, your CPU should have the power to do this. Just remove the tick marked "Hardware Acceleration" from the video tab in Cyberlink properties when the disc is not playing.

3 things that are missing... What drivers are you using, what version of Cyberlink and what discs does this happen on (if all, please list a few).