I have had this issue repeatedly 3 times now. The problem seems to be associated with a Windows 7 update. Not sure which one though. After a clean OS install, everything functions fine. To test, I installed no other applications, simply turned Windows Updates to automatically install all, even recommended updates and BAM! MPEGs start causing issues. They won't play correctly as they take way too long to load, even small files. The status bar / address bar at the top of the explorer bar starts to show a progress as if it's refreshing the window or reading the file, and WMP12 hangs up severely. I tested this with other video players as well and noted the problem was constant. The issue seems to be the windows explorer, as you said, trying to read something in the background and pegging out the processors. As I still haven't found the culprit windows update, I now disable them all just so I don't have this headache again.
Hope this was helpful. If anyone has any further information on this, PLEASE let me know. Perhaps some sort of registry editing problem during an update? Just a thought....
EDIT: I was able to remove this problem twice by removing recent windows updates. However, this most recent time, some updates were unable to be removed and I was left without a restore point prior to their installation. Back to the re-format.... :/ Just a tip for anyone who wants to try and single out the faulty update. If you do, please post.