I'm experimenting the same on a fresh install of hardy on my acer aspire
5672 dual core, with ATI mobility radeon x1400. I've tried mplayer and
vlc with default installation and with propietary drivers (from repos),
with compiz and within, video playback is always pixelated. The same
videos on windows looks smooth.

Only with no propietary drivers, no compiz and vlc configured to opengl
output, video shows smooth, but video playback is very slow.

-- 
pixeleted video playback upon fullscreen
https://bugs.launchpad.net/bugs/231519
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