I have reliably got 1080p H264 working - along with all other formats I commonly use, in Windows media player.
1) Leave cyberlink powerdvd installed from original build
2) Install the latest GMA500 drivers (see sticky thread)
3) Install Haali media splitter
4) Installed xvid codes from the xvid site.
It now plays everything I have - 1080p, 720p, xvid, divx, etc
I did not install dell media experience (reference above) - and I found without the factory install of powerdvd, but with dell media experience, it didn't work.
DO NOT install CCCP, ffdshow coreavc or any other codec "packs". I found all of these had issues, in particular CCCP & ffdshow I couldn't disable them from overriding the hardware decoding of h264, even when I deselected h264 in the settings. If you need additional codecs, install the specific individual codec you need, use G-SPOT to identify the unknown format and get the required codec only. (See xvid above)
CoreAVC I just don't see the point of for us. It appears to only decode H264, and just about allows us to watch 720p HD, but as far as I can tell can't decode other formats, and isn't needed once hardware decoding works.
Hope this is useful.