I can confirm it partly. Overlay for video output isn't used anymore in current 
Hardy with my i915 chipset since compiz widgets like sound increase show parts 
of the video under transparency and the compiz effect shift + alt + cursor up 
show the video in the reduced window.
Video output seems to be slower but it seems to work in full screen at least 
for standard videos after a short test. It lags very much if Totem shows the 
progress bar or the right mouse button is pressed.
The other point is that I am afraid that Bug #129025 appears again. I currently 
couldn't test it with this external monitor.

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xv is not working on intel 965 (x3100) when using compiz
https://bugs.launchpad.net/bugs/201596
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