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Hi Cybersurfer11,
I was having the same issue with the software and was in contact with the Technical support, I believe they operate in India. Well, they diagnosed the issue but ultimately they also detected the issue is with the microsoft only. So, in any case they were helpful in detecting the issue and Microsoft further helped me and it was resolved. I am happy with the service they give. I would recommend you to contact microsoft in this case and your issue will be resolved. 
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I was having the same issue with PowerDirector 9 Ultra64 and contacted Tech support, they were really helpful and guided me well for resolving my issue in just maximum two goes.
When I put my first concern that I am not able to enable my Intel Quick Sync video, they provided me the information for which devices are actually eligible or compatible with this feature. Below is the information they provided:
1. CPU: 2nd Generation Intel® Core™ Processors with Intel® HD Graphics 3000/2000 (Intel Sandy Bridge) http://www.intel.com/products/desktop/processors/index.htm
2. Mother board: Intel® H67(B3) Express Chipset
3. When using Intel Quick Sync video, user can't use external/standalone graphic card (Some of the Motherboards has the function to switch between embeded Intel graphic card or external graphic card)
4. Software supports Intel Quick Sync Video Technology (Like PDR, MediaEspresso) 5. Windows XP itself doesn't support Hardware Decode. (AMD Stream/NVDIA CUDA/Intel Quick Sync).
This information helped me and tech support alot to clarify the details and moving on further as my system was eligible and meets the requirement. They have also asked for the DxDiag info and when I sent them, they tested it and found that I am having this issue because of the latest drivers of Intel that I put i.e. 15.22.1.2361 (8.15.10.2361).
They suggested me to download the driver's version 15.21.13.64.2342 (8.15.10.2342) released on 3/29/2011.
http://downloadcenter.intel.com/Detail_Desc.aspx?agr=Y&DwnldID=19981&lang=eng
This resolved my issue and I am not having any more problem with it.
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