Disabling the Overlay within VLC places a slight bit more weight on your CPU and is generally a problem with your Video drivers, if you are using VLC on a main monitor and not a secondary monitor. On a secondary monitor many video cards do not support the use of video acceleration so the overlay must be shut off. But if you want to play HD files that are processor intensive it may be smart to update your video drivers so that the use of this switch is not necessary.
Bad news, event with the latest toshiba driver, still need uncheck the overlay option for my account (hydravision and windows transparency works fine, strange ...)
But i am quite happy with the uncheck overlay workaround