The 8500 architecture is not up to the task. In my shader tests, I see it losing about 15-20% performance using pretty small shaders.
Combine the bazillion polys 3dmark is using in most of those tests and the 8500 is going to be murdered. It's vertex engine is not up to the task.
However, the 9xxx series seems to be much better at it.
For me as a developer, 1.4 pixel shaders are the baseline to work with. I simply will not attempt to port my shaders to 1.3, 1.2, and 1.1 PS levels. Too much work and code and the performance levels of the previous PS versions was pretty poor.
I don't know of any other developers using older shader versions for anything serious right now. I know a couple of games using them today, but they were designed before 1.4 became a known quantity.
In house, I had to write a synthetic test for shaders to find out the ramifications of using them versus using the CPU to accomplish the same task. Overall, the 1.4's are a win on the 8500, if you are careful about vertex/prim counts.
But in a heavy vertex/poly count scene, the 8500 will die when using any PS shader.