For people running into either the "leaking overlay" or the "blue people" problems, I wrote a patch to libvdpau_trace.so designed to suppress them.
Please clone libvdpau from git and apply this:
This will cause the resulting trace library to change the VDPAU behavior of any clients that have tracing enabled, so make sure you only enable tracing for the web browser that loads the Flash plugin (eg. for Firefox in Ubuntu, you'd add an "export VDPAU_TRACE=1" line to /usr/lib/firefox-n.n/firefox.sh). Trying to use tracing on any other VDAU client after this has been installed won't work right as it suppresses all the tracing messages and swaps color channels for some operations. Please make sure to restore a vanilla build of libvdpau_trace.so on your system before filing a VDPAU bug against something else.