I would not say that the cpu usage difference between Xv and X11 is not
the deciding factor because for more standard size videos:

Xv uses about 12% (8% vlc, 4% Xorg) of my cpu on average while playing a 
652x356 xvid video
X11 uses about 14% (6% vlc, 8% Xorg) playing the same video

I would consider this difference to be almost negligible.  However I did
not notice the scaling effects (I did not resize the video while messing
with this) until you pointed it out.  That is a much bigger issue for me
than the nominal cpu usage difference.

Regardless, this probably means that the current settings is probably
the best setting, and thus while this bug report (and my duplicate) was
very informative, it really was never a bug to begin with...  At least
not one with a viable solution.  So I apologize for taking your time on
the issue, although I really do appreciate your expertise and help :)


P.S.  The only reason I mentioned Ibex is because Tim mentioned "This
might get fixed for Intrepid.", which sounded like TexturedVideo may be
enabled by default...

Thanks again!

-- 
Need textured-video - No video when using window transparency.
https://bugs.launchpad.net/bugs/213532
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