should this play 1080p movies?

try using media player home classic cinema - it has the best implementation of DXVA

could also try using the latest version of VLC, then going to preferences, then inputs/codecs and checking GPU acceleration
 
Hardware is fine, what this is is some software issues. As said try MPC, i personally use it (as part of the K-Lite Codec pack) and its never failed me.
 
that should play hd material using either the gpu or the cpu.


interesting fact, my cpu (phenomII-965 at stock [3.4ghz]) can actually decode and play 5 bluray rips simultaneously, hd audio et al, with absolutely no dropped frames. which is kind of comical considering i can only play two streams using gpu decoding.
 
What operating system are you using? What kind of files are they you are trying to play, .mkv?

Regardless of above, make sure you download the driver for your card off of the ati website.
 
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