I bit the bullet and got the WRT-600N.
I was seeing the same problem with that router and I tried everything to resolve the issue. I finally went and rechecked the firmware and it had the original release (I swear I checked it when I set it up 2 weeks ago). Anyway, the new firmware made the problem disappear. I now have a nearly solid line across the top of the graph with occasional dips down to 1 bar from the top. This is with WPA turned on. I also set the radios to "802.11n only" for 5Ghz and "802.11g only" for 2.4GHz and am using different SSIDs for each band. No stuttering or pixelization on HD shows with these settings.
Velocity Micro Cinemagix Grand Theater, C2Q, 2GB, 2 TB, 2 DCT, 2 HDHomeRun
XPS420, C2Q, 3GB, 1DCT, 2 HDHR
Homebuilt C2Q, 2 GB, 1.5 TB, HVR-1600, FireSTB
Dell E1705, T7600, 2GB, 250GB, HVR-950
WHS, WRT600N, DMA-2100, DMA-2200, XBox360