Comment 7 for bug 564378

aeromojito,

sorry if this is a bit late, but, could you try setting:
Option "OverlayMem" "1000000"
or if you want more than full dvd resolution (720x576) maybe a bit higher OverlayMem, provided you are able (and willing) to go with modest resolution and/or depth, to make more video ram available

and also set your DefaultDepth to 16, or even try 8 ?
I believe the X desktop will display in whatever depth you choose, but the video - as it is in an overlay that is managed directly by the video chip - will be in true color. You could even play with mplayer from console (no X needed) !
see: http://forum.thinkpads.com/viewtopic.php?p=31808#p31808

So, reducing Resolution (1024x768 or 800x600 ) and/or depth may help, mplayer (or gmplayer if you shall) may also be preferable over vlc / totem in terms of CPU overhead!