Sorry, to be clear, what I meant was that when Media Center is set to use "System Volume" it does not use the normal system volume behavior, which is to use the 16 steps mentioned in my original post.
Media Center is only making adjustments in 0.5 ㏈ steps whether you are using the coarse (16-step) or fine (64-step) volume control.
Perhaps a good compromise would be to respect the system scale when using the coarse controls, and use the same scale as internal volume (mostly 0.5 ㏈) when using the fine controls?