So no one else is having "crackling" problems with WMP12 (and smplayer).
I have managed to make it much better by disabling sounds in my HTPC app, which I think were interfering with playback. It seems it is the mixer that throws a fit in some apps (MF?) if other sounds need to be mixed in with it. MPC-HC and PDVD are fine. Even bringing up the start menu when WMP/smplayer are running is enough to send the sound into fits and once it has started it won't stop until playback is stopped and restarted. It gets worse as you up the output bitdepth/sampling rate. Once it starts it is unlistenable to @24/96, bad but survivable @16/48! The new Realtek drivers are the same.