Well, certainly a capable system you have there, the 1GB of ram is overkill for even HD content, for regular MythTV 256MB seems to be plenty.
You need to install the latest ATI drivers if possible. ATI video driver support for linux is still lagging compared to Nvidia cards, but my understanding is that its getting better.
The final thing, I'm guessing that you are running very high resolution, there is little reason to run a multimedia computer at a higher resolution than your source material. For standard TV, about 640x480, MythTV is actually designed to have a native resolution of 800x600, which handles standard TV with minimal scaling and has sufficient resolution for the menus and On Screen Display.
Good video drivers will help this problem, but my guess is that your CPU is currently doing all the work for real-time scaling and playback.