Starting from version 10.0 XBMC can use hardware acceleration to render video (DXVA 2 support for H.264, VC-1, and WMV9) on Windows 7 too(http://mirrors.xmission.com/xbmc/releases/10.0-Dharma-changelog.txt). This is very useful if you have, like me, a ION based media center with a ATOM processor or similar that is not able to manage 1080p movies.
you can find this flag in XBMC under:
With hardware acceleration disabled, my dual ATOM 1.6Ghz is not able to render well 1080p videos, and the CPUs are heavy used.
With hardware acceleration enabled, the video goes smoothly and the CPUs are almost idle.