I have also noticed the artifacts on progressive xvid content in XBMC. I think my nvidia ION does not even provide acceleration for this.
I will provide more information as soon as possible.
Edit: Upgrading to 260.19.29 has fixed the artifact problem for me, but now I have lost audio over hdmi (that could be down to me playing with pulseaudio though).
Edit 2: Artifacts ARE still present on some clips, but less noticeable.