Most cutscenes in the game are prerendered video. On occasion it'll switch to in-game, which is noticeable due to the bump in frame rate.
I've got the game on Steam and have minimal issues. One crash and a few minor glitches. Changing a few settings alleviated most mouse issues I had, but even with default settings the game was entirely playable. I just finished it today, on Hard difficulty, clocking in around 11 hours. Unfortunate that others are having issues. I must be lucky because my Steam copy of L.A. Noire ran without a single problem as well.