Ok, so I installed GPU-Z and Coretemp and took some readings while in idle and also during stress testing.
I also installed CineBench and have some results from that too. The below GPU result from CineBench was by far the best score I could get. It was odd because I ran the GPU test about 5 times, 3 times I was getting between 10 and 16 fps, but then I had two results in a row of 25-30 fps. I seem to get this same fluctuation in games too.
Another thing I tried was putting my old 8800GTX in and trying that. It produced the exact same problem as the 5850. Windows 7 only installed the Microsoft stock 8800GTX driver(dirty, I know) plus I didn't remove the ATI Catalyst drivers, but this should be enough to tell that it probably isn't the graphics card, although thats not 100% I guess.
Another reason I'm starting to think its not the gfx card is in games the sound is also affected. In Dragon Age I noticed parts of the voice overs were repeated and distorted. They seemed to happen in sync with lagging/choppiness of the framerate.
I also tried MemTest and that came back with no errors and passed no probs. So I guess we can rule out memory.
A couple of posts said check the PCIE frequency but I can't seem to find it in the BIOS, let alone change it. I guess we can't rule out gfx card until this is confirmed?
GPU-Z in idle:
GPU-Z under stress:
CoreTemp idle:
CineBench during the GPU test:
CineBench during the CPU test: