You might have disconnected when it was mentioned so I figured it had passed you by. Sometimes well discuss things further and wait for you to come back

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Anyway, the foreground/background settings were purely so you can set something which wont be overwhelming your graphics card (you only have a limited number of FPS, and you are trying to share them 12 ways). You will only know if this is the case based on monitoring the hardware, but, if you got some improvement from changing the strategy, then I'd guess it is CPU bound, and this might just be a side effect for the number of source windows that need to be synchronised.
As I understand it,
this is what is providing the VideoFX functionality, so if you are technically minded you can read all about it.
This section I think is where the more source surfaces (windows rather than actual videofx sources) will slow down videofx..
Direct3D 9Ex Shared Surfaces Plus Manual Synchronization Helper
The most fundamental task in Direct3D 9Ex and Direct3D 10 or 11 interoperability is passing a single surface from the first device (device A) to the second (device B) such that when device B acquires a handle on the surface, device A's rendering is guaranteed to have completed. Therefore, device B can use this surface without worry. This is very similar to the classic producer-consumer problem and this discussion models the problem that way. The first device that uses the surface and then relinquishes it is the producer (Device A), and the device that is initially waiting is the consumer (Device B). Any real-world application is more sophisticated than this, and will chain together multiple producer-consumer building blocks to create the desired functionality.
Of course I could be talking out my arse on this as I don't really know how Lax implemented videofx (he said it uses the Windows DWM API, but I think underneath it, the DWM will be using DXGI), and if he refutes my theory then I reserve the right to edit my post accordingly and remove any stupid statements.
edit: I see you found it is CPU bound as I typed this up... time for an upgrade perhaps? Intel CPU's are considered more powerful when it comes to gaming, unfortunately they are also more expensive, and doubly so when you need to change the platform under it.