I believe that this is <https://bugs.launchpad.net/ubuntu/+source
/xserver-xorg-video-ati/+bug/122979>, and that it has been fixed.  Can
you verify that you have this version: xserver-xorg-video-ati
(1:6.6.193-1ubuntu1) installed?  You can check that with the output of
"apt-cache madison xserver-xorg-video-ati"

** This bug has been marked a duplicate of bug 122979
   [aiglx][intel][r300] Video playback is buggy under Compiz

** This bug is no longer a duplicate of bug 122979
   [aiglx][intel][r300] Video playback is buggy under Compiz

** Changed in: xserver-xorg-video-ati (Ubuntu)
Sourcepackagename: compiz => xserver-xorg-video-ati
     Assignee: (unassigned) => Chris Halse Rogers
       Status: New => Incomplete

-- 
[gutsy] vlc doesn't render properly with compiz 'normal desktop effects'
https://bugs.launchpad.net/bugs/132360
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