In both local video and online streaming video, visual playback often lags and freezes, while audio playback continues uninterrupted.
Currently downloading driver version 6.14.10.4764 (from 13/10/2007). Will post result.
Playback seems much better with the updated driver.
Depending on the resolution and bitrate of the video, it is possible that your computer just can't handle it. Try watching a youtube video in the different resolutions, from 240 to 720 or 1080. If a low resolution works fine, but a high resolution doesn't, your computer probably isn't fast enough.
The reason that audio is still continuing, is because it's handled by your soundcard, and not the CPU or GPU. When one of those lags (low perfomance) your audio might continue playing, because it isn't affected by CPU or GPU usage.
