I don't have issues w hardware acceleration anymore. Using the stock MS decoder on an intel DG965WH MB that has integrated GMA X3000 integrated video with an e6300 CPU. Initially I had stutter issues that were resolved by a new release of intel's video driver.
MCE 2005 represents the MS version 3.0 of MCE to me. It's stable, it has a well defined features set and a clean user interface. It seems to be the culmination of the original vision of MCE. They got all of the core features working the way they should (except the music library which was slow as molasses).
Vista MCE is a re-engineering of MCE to allow it to handle new features and capabilities... protected HD content, extenders, third party plugins, widescreen displays, etc.. It really only seems half done to me. They redid a lot of the under-pinnings, new audio stack, protected path, improved priority for audio/video processes, a new SDK that allows developers to build much better plugins, a new UI layout, etc..
I prefer vista even though it's not quite 100%. I like having the MS decoder available that just works, I like the fact that plugins are much better looking and feeling, I like some of the new UI (they need to do more work on cleaning this up, the main menu is out of control).
The biggest reason is that in true techhead fashion I'm waiting for it to become better. I'm waiting for them to add DirecTV support, I'm waiting for low priced purpose built extenders, I'm waiting for them to fix the start menu and to finish using the new UI all the way thru the app.
My biggest complaint with vista is how slow stable drivers have shown up.