This is half true.

The window backbuffer in Vista is stored both in system and video memory. And GDI is not hardware accelerated anymore. Note that at this point it makes less and less sense as we are able to do things faster on the cpu, so any hardware acceleration only has the utility of being able to keep the surfaces near the hardware (in video memory).

With Windows 7 and WDDM 1.1, the window backbuffer is almost always in video memory, and some GDI DDIs are once again accelerated to facilitate that locality.

Either way though you're better off with the DWM on than off.