[MTUSUPPORT]

What ATI Video card do you have?

There was nothing that was changed with the Graphics from 3.120, that I am aware of.

It does Require DirectX 9 to correctly work.

Try doing this also, to see if it makes any difference.
If DirectX still won't hold it's settings after trying what Bryan suggested, you can go in through the back door.

Open CONTROL PANEL.

Open SOUNDS AND AUDIO DEVICES.

Open AUDIO.

Under SOUND PLAYBACK DEFAULT DEVICE open ADVANCED.

Open PERFORMANCE.

You can now change the audio hardware accellerator.

If it still won't hold the new setting, something is not right with the os, as Bryan indicated.