This Tutorial is out of date! See an updated version by clicking HERE, it is much better, trust me!
I will keep the old version one here for the many insightful comments.
For this tutorial I will be using Media Player Classic Home Cinema and Cyberlink PowerDVD 8 decoder.
You will need a hardware accelerated video card. Currently either a Nvidia 8xxx or 9xxx series, or ATI Radeon HD series card will work.
If you have Haali Media Splitter installed, hardware acceleration should also work on videos in the Matroska (.mkv) container.
If you have installed a codec pack, check if VSFilter is installed. If it is installed, open the configuration and under the General tab set it to not load.
Download Media Player Classic Home Cinema (MPC-HC) and extract it. If you have an older version of Media Player Classic installed I suggest overwriting it. Install PowerDVD 8 or newer, and when finished open MPC-HC.
In MPC-HC choose Options from the View menu.
Go to the Playback section and enable “auto-load subtitles” to let MPC-HC handle subtitles.
Continue to the Output section under Playback. Select “EVR Custom Pres.”
Change section to “External Filters” and click “Add Filter…”. Select Cyberlink h264/AVC Decoder filter and click OK.
Select the added filter and make sure it is set as preferred.
Now, try playing a h264/x264 encoded video to see if CPU usage is lowered. When playing you can right-click the movie, select filter, then choose the Cyberlink filter and see if the DXVA option is enabled.