Just a heads up for anyone planning to upgrade via the app store instead of reformatting. The upgrade will uninstall all of your apps, including regular desktop programs and driver utilities.
There's a stockpile of older inventory that's being sold right now for really cheap. I just got a Lenovo Ideapad with Sandy Bridge i7 quad and an AMD GPU for only $700.
What movies have you been playing? DVDs are pretty much hopeless at 1080p since it doesn't have the necessary resolution on your monitor. Also, some blu ray movies have a bad film to disc transfer that's causing the poor quality. Try using a Pixar movie or a similar animated film to test out...
There are many cards that are passively cooled that would be sufficient for decoding videos. You should consider getting a different card or getting yourself a new passively cooled heatsink. Underclocking won't help you bring the temps down to where you run with the fan off.
For $30 you might be better off getting an old PCI video card that has an S-video output. It doesn't take much horsepower to display at 480i so anything would do the trick.
It's just supply and demand. Since S939 chips and motherboards aren't being made anymore, the price is a bit high due to the demand from people who would rather spend a bit more to get a replacement part instead of building a new machine.