Freezing during video playback

I am hoping someone can shed some light on this problem with video playback.

Video playback freezes after anywhere from 30 seconds to 15 minutes into a movie. This happens with AVI's as well as DVD's on hard drive. Never happens with streaming video such as Netflix. And, I haven't really played a physical DVD all the way thru since every movie is saved to the HDD where I want them.

I can now predict just before it's going to occur by the hard drive activity LED going 100% just before it freezes. With Vista the only thing I could do was do a hard reboot, but with Windows 7 I can move the mouse to hit the stop button. After a few minutes the hard drive activity stops and I can hit play to continue the playback at least for another 10-15 minutes until the hard drive goes crazy again and we do the same thing again.

I've searched just about every forum website and have yet to get this issue figured out. This issue actually started with Visa X64 Ultimate and continues today with Windows 7 X64 Ultimate RTM. I have replaced every component of my system other than the case and hard drive. The Windows 7 is a clean install with minimal other software installed.

Current Hardware/OS:

AMD Athlon II X4 620 2.6Ghz AM3 CPU
Gigabyte MA785GM-US2H AMD785G Socket AM2+ MB
OCZ Vista Performace Ed. 4096MB PC6400 DDR2 800MHz
Sapphire Radeon HD 3450 Video Card - 512MB DDR2,PCI Express 2.0 to my 47" 1080p LCD via HDMI
Windows 7 Ultimate X64 RTM
Seagate Barracuda 7200.11 - hard drive - 1.5 TB - SATA-300

Note: The only item that was carried over to the newest setup is the HDD. This may be the smoking gun. The HDD is partitioned with a 120GB C: and the the rest of the drive is partitioned as E: and is where all the video files are stored.

I have disabled all screensavers, sleep mode, hard drive shutdown, indexing service (was never enabled) and problem persists.

My original system only used a Athlon X2 so when it froze I could not get any response and had to hard reboot, but with the X4 CPU at least I can move mouse to hit the stop and wait for the HDD to settle down. I upgraded to the X4 and a separate video card thinking that the problem was too much CPU load during playback.

The only thing I haven't tried is adding a seperate SATA HDD and moving the video files to it. Do you think that may be the answer? Do you think this might be page file related due to the crazy HDD activity just before and after the freeze?

I did notice last night that 99% of the time it never does this when only I'm watching a video, but happens ALL the time when the wife is watching a video with me, just after I tell her I think I figured it out.
Do you think there may be a connection??

I'll take any advise/comments/suggestions that anyone can offer.

Thanks HTPC.