^ That's not entirely true... but to some extent. For example, in my personal experience I've found that Microsoft MPEG2/DVD decoder (software) produces much better results compared to nVidia purevideo DVD decoder. In fact, it was better in most aspects compared to MPC/MPC-HC's internal DVD/MPEG2 decoder, VLC and even Cyberlink's decoder. Do note however, that I'm talking about decoder without any post-processing filters. MS MPEG2 decoder didn't have any post-processing features of it's own, but you can use it in conjunction with MPC/MPC-HC for hardware pixels shaders (such as denoise, deinterlacing and YUV color range change).
Hardware decoder's priorities are always Compatibility -> Speed -> Quality -> Added Quality via post-processing. I would say that current gen HW decoders have gotten much better at producing the images as intended by source without over-processing them just to look better (and speed hacks). It's quite like audio really, where post-processing to video is like DSPs to audio. To me, post-processing only makes sense to me when the original video source is sub-par quality. Most of the properly ripped 720p rips are most of the time better than badly encoded 1080p videos.
I personally keep my graphic card's video post-processing features to lowest value (except YUV color-space conversion and dynamic contrast) and add up denoise or sharpen filter in MPC-HC when required for certain videos.
Just a side note, since OP is also using Intel HD Graphic:
On the HTPC where it's not always possible to change filters and stuff... luckily XBMC's new version (Dharma) has better video playback handling. It can turn off post-processing for HD (H.264/AVC1) material and use HW acceleration and use full post-processing for SD content. And my HTPC has on-die Intel HD graphic (Core i5-530) which can handle 1080p HW acceleration just fine under new XBMC version. So you can be rest assured that MPC-HC will provide HW acceleration on your system for HD content.
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