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Are you running SteamOS on the client?
( EDIT: oh, windows update.. Probably not)
And I should again make clear that this isn't a list of what is currently using hardware encode/decode or even what is confirmed as going to be supported (although I hope it all will be).
The issue will be that valve probably have to write different bits of code to talk to each of these implementations (possibly different per major versions of the driver) across the clients (windows, Mac, Linux). That makes...(math time) at least 18 implementations to develop and test.
:-/
Some of the older cards had dedicated encoders for MPEG-2 (for instance) or parallel computing components that could help out software with transcoding video, but I think dedicated hardware encoding of H.264 was new in the 7000s.
http://www.amd.com/us/Documents/UVD3_whitepaper.pdf
Sounds a lot like the previous streaming was a slower hardware/software thing.
Streaming is definitely using h.264, BTW
Edit: unless libx264 does other codecs - I hadn't considered that.