Hi jkwaterman,
Your PC is very well specified to play DVD and BD. What type of video files stutter ? All, DVD, DVD + BD ?
From my understanding of your post the problem is stuttering video and stuttering audio, is this correct ? Is it at the same time or audio fine and video stutter etc.
Something interesting you mention is when you disable the onboard audio driver PowerDVD will hang. If you open PowerDVD and choose default audio device (rather than specifying) then disable the oboard audio device and set the ATI one as default does that work ?
I've been using various ATI cards for a few years now and there have been some setup issues. For example I owned an ATI 2450 card and upgraded to ATI 3450 and thought as the drivers were generic it would all just work but I was wrong. What I had to do was re-install the ATI 2450, remove the drivers, install the ATI 3450, load the drivers from the manufacturers CD and then update them from the ATI web site (putting the ATI drivers straight from the web site without installing them from the CD first didn't work).
With the latest drivers (11 (not tried 11.2 which was released yesterday)) I've found that I didn't even have to load the realtek driver, the one that comes with the ATI package seems to be robust.
Unfortunately working through these issues tends to be a methodical process of experimentation noting down tested permutations until a setup works.
Before you go through the process of working out your issue I'd always recommend downloading the latest version of PowerDVD (from the Cyberlink web site menu Support then Software Update) and running the Cyberlink BD advisor (from the from the Cyberlink web site menu Support then BD advisor).
My PC is a Shuttle SP45H7 which also has an onboard audio solution and this needs to be disabled in the BIOS otherwise Windows sometimes decides this is the primary audio device (no idea why). If it's of any use I will take note of my settings and post them, let me know if you want me to do this.