Have you tried setting affinity manually? I've found that Windows XP still tends to treat multi-core CPUs as hyperthreading CPUs, meaning it gives priority to even cores (0, 2, etc.).
This means that if you have a dual-core system and the first core (core 0) is only being used at 90%, Windows will tend to assign new threads to that core, although the second core is just sitting there doing nothing. When it hits 100%, then Windows moves it to the second core. But then the first core drops back to 90%, and Windows brings it back. It's this constant context switching that causes hiccups.
I notice this a lot on my quad-core system (two dual-core Opterons) because I have some background processes configured to use precisely 90% of available CPU cycles (they slow down automatically if another process needs more cycles). Assigning those process directly to the "even" cores (1 and 3), either using Task Manager or imagecfg.exe, solves the problem.
Your game shouldn't need to access the disk during normal gameplay (or, even if it does, that shouldn't interfere with rendering). The only exception is if you don't have enough RAM, and Windows is hitting the pagefile.
Quad-core is definitely overkill for a HTPC, especially if your tuner card(s) have built-in encoding acceleration (which most of the high-end models do). A low-voltage dual-core CPU will do the job just fine, eat less power, and release less heat. Remember that AMD's TDP is usually stated for an entire family (so that the CPU can be upgraded at any time). So although dual-core and quad-core CPUs might have the same TDP, the dual-core is likely to use 25-40% less power.

quad-core AMD Phenom chips would make quite an excellent Home Theater PC