Same problem with latest driver. It took awhile longer to happen this time. I was acutally able to watch about 1.5 hours of videos and switch them back and forth from fullscreen and back without problem. Then I opened another video and I started getting this error again.
VDPAU nvidia: Version: NVIDIA VDPAU Driver Shared Library 260.19.26 Sun Nov 28 22:58:32 PST 2010
VDPAU nvidia: Error detected 1 426