So I am working in Max 2012, using version 0.70b - Beta 8. I have set the time to a variety of values and find that the time taken per frame is always around the 1 second mark, perhaps less. I have tried the render with the iteration checked and unchecked and not found any difference so far.
When you say does progressive refinement work in my scene, are you asking whether for example when I move the camera does the viewport re-evaluate the scene and settle into a higher quality? When I open the PowerPreview script, neither iteration or progressive display buttons are blue by default, which I am guessing is the on state?
When I am making the preview, I do not click on another app, so I am assuming that max is running as the foregorund application? Or do you mean, you cannot have anything else open?
Here are a couple of images, hopefully they are what you are wanting. I have just posted a small section of the viewport, I was worried about getting in trouble to be honest, hopefully that area shows what I mean.
Struggling to get the forums picture tool to work, just results in broken image thumbnail for some reason, so just provided links.
Left is viewport, right is capture.