Well I at least have a work around if anyone reads this and is having the same problem as me.
*NOTE* This will only work with Intel Z68/H67/H61 platforms. Those are the only platforms that can utilize the integrated graphics of second generation Sandy Bridge CPU's. This will not work with the Intel P67 platform because the integrated graphics are not supported on it.
What I did was install the Lucid Virtu software to utilize the integrated Intel HD3000 graphics of my Intel 2600k CPU. After installing the software you have two options, you can hook your monitor straight up to your motherboard or keep it plugged into your discrete GPU. If you plug it directly into your motherboard you'll use the integrated graphics to display windows and non-graphically intensive programs like browsers or 2-D games so your system can keep your GPU idle while your not gaming and in turn(so Lucid would like you to think) reduce the power consumption of your PC. Personally I keep my monitor plugged into my discrete GPU because I don't like to fool around with whitelisting games.
But enough about Lucid's Virtu software. What this enabled me to do was utilize the Quick Sync technology of the Sandy Bridge CPUs, therefore allowing me to use hardware acceleration through the Intel HD 3000 GPU.
Quick Sync is so fast, that I'm actually really happy that a driver/program error caused my original problem. I wouldn't have stumbled upon the Lucid Virtu software.
I would actually suggest to anyone using hardware acceleration on a discrete GPU to think about using the Virtu software to unlock your integrated GPU's power. If you do a quick google search on the Quick Sync technology you'll see that it's no slouch in the encoding/decoding department.
I hope this helps others that are in the same boat I was. If you have a 2nd gen SB CPU and the right chipset, you'd should really look into the Lucid Virtu technology.
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