can you play other audio (ie, wav mp3 etc) ok?  if you can, i would guess that windows is trying to play the audio back digitally.  ie, its trying to extract the audio digitally and play the result.  like its ripping the cd and playing it at the same time.  look for an option that sounds like play audio digitally.  also, download winamp or something like it and try playing the cd/ripping the cd through winamp.

if its skipping on everything ... idunno.  i asked about the cpu using wondering if it wasn't vista's drm.  i saw a post right after vista was released about someone seeing a process with a nefarious name using 10% cpu while playing an mp3 though wmp, and that same process using 0% while playing through a different media player...