i dont think it would be psu related. it wouldn't "slow it down" i wouldn't think. it would artifact and lock up before you saw a decrease in performance.
sure sounds like drivers to me. don't use the newest drivers, go back a couple sets and use those, use some established drivers if you can find them (i'm not up on AMD's card drivers, because i dislike ATI cards, no offense).
i'm going with card drivers or cpu could be overclocked a bit. i dont think the overclock you will get out of a 185 will be much, maybe 400mhz if that much, so you really aren't going to see any giant improvement. plus, a 2.6ghz dual core opty is plenty good enough to run those games you listed in high detail with a good card.
i am wagering on the card drivers...or some other firmware/software issue. i am almost certain that it isn't the cpu, and even more certain that it isn't the psu.