XBMC is a great app, although the reason why you're finding it runs fine with your video card is that XBMC does not use any hardware acceleration. So you could have the best card in the world, and it wouldn't help performane.
That's not true. XBMC on linux supports hardware video decode via VDPAU ( http://en.wikipedia.org/wiki/VDPAU ). nVidia Geforce 8xxx and later chips are supported, as are a couple of S3 Chrome chips. Depending on the age of the chip not all video codecs are accelerated, but all the supported chips include at least some support for H.264 and VC-1. Geforce 210 and later even accelerate XviD and DivX. Currently neither ATI nor Intel include support for VDPAU in their linux drivers.
XBMC has also recently added hardware decode support to their Windows build. It uses DXVA2 on Vista and Windows 7, and there is experimental support on XP using DXVA.