I have an 8600gt in one machine and built another both on Silent versions from Asus. One is hooked up in my living room and the install went just fine. It installed the Nvidia driver with the dvd install and loaded up in 1080P at the wizard on the dvi/hdmi port. I then just dwnloaded the latest Nvidia driver from their website and installed as per the readme.
I did the same thing with the 8500gt silent yesterday I have not installed the latest driver on that machine as of yet, as I have not decided if I am going to use at the core or the md for my theater room, but the card did install fine with the dvd install and it loaded the nvidia driver again upon install of lmce. Both Setups are LMCE 710RC2 DVD Install.
The first setup is a Asus P5K3, patriot 1333 dddr3, Intel C2D - 8400, Asus 8600GT 512 Silent PVR-150 MCE, X-plosion 7.1 sound, gyration and MS uirt and remote in a Zalman HD-135 chassis.
The 2nd setup is a Asus P5K-E, Patriot 1066 ddr2, Intel C2D - 8400, Asus 8500GT 512 Silent, pvr-150 LP, ADI 1988B HDAintel sound On-board (Manual Settings in Admin, Alsa 1.0.16), Imon(Soundgraph w/remote not working yet) in Silverstone LC-16MR.
The key to both cards and the install of the latest driver is A) You must read the readme on Nvidia's webpage completely and be careful when rewriting your headers with this install process . B) your xorg.conf must be correct for your display device. The driver that gets installed (dwnlded with LMCE work just fine in most cases)
I did use alpha blending for a while but switched to overlay as I did not like it in Alpha mode, but it did playback fine with it on with the 1st setup I never tried the 2nd, I just set it as overlay and leave it.