I get the exact same behavior with driver version 260.19.21 and just about any video player, e.g.: MPlayer-1.0rc4_r31930, vlc-1.1.5, vdr-sxfe from xineliboutput-1.0.4. They all just use the XVideo extension, hence I believe, that this part of the driver likely to be defect.
This is with a 2.6.31 kernel. Driver version 195.36.15 doesn't show this behavior.
Here are a few screen shots:
Let me know, if I can provide more infos..