ATI is your problem, i think... i have not seen any reports of that chipset having the same problems with nvidia cards.

if you can, borrow a newer nvidia card to test before buying a new one. i definitely would stay with a more
modern series of cards- something new withing the last year or so, to avoid legacy issues.

even the cheap cards work very well- a 5500fx pci (not pci-e or agp) card i was using had no problems at all
with 720p HD streamed over my network from firewire out on the cable box... it never dropped frames, etc.
and ran beautifully with no interlacing.