Glad it worked for you. Actually it broke my setup and I've had to roll back to 7.7! I have a 2600XT also and 7.7 worked well on XP Pro SP2 with my setup (Samsung 40" 1080p LCD TV).
Essentially I have to modify the overscan settings in the radeon control panel to get the image to fit my screen (too small otherwise) via DVI. Using 7.7 this setting applied to all applications including HD-DVD playback via Cyberlink Ultra. Moving to 7.8 it applied to all applications barring Cyberlink Ultra HD-DVD so I can only guess there is some issue between Avivo acceleration, Cyberlink Ultra and Catalyst 7.8 over/underscan settings.
I've since upgrade to a clean install of Vista Home Premium x32 and the same issue applies. Again I've had to go back to 7.7. Luckily 7.7 seems solid for me on the HD-DVD playback front.