Same issues here (Shuttle XS35GT V1). This affects performance of XBMC, VLC etc, basically all video playback under VDPAU on the Shuttle.
According to this thread you know what the problem is : http://www.nvnews.net/vbulletin/show....php?p=2478085
...and your driver versions < 195 do not have the problem.
PLEASE look at this - a solution would be very much appreciated and help keep ION a recommended platform for htpc users...