I have exactly the same problem. The main thing that looks different to me at first glance is that the slash characters in the source URL in media information are being escaped by backslashes. i.e. "http://www....." becomes "http:\/\/www..." and that would be enough to throw off...
I received the error with v1.1.1 on winxp-sp2 I then reverted to v1.1.0 and got a similar error. test URL: http://www.youtube.com/watch?v=dMH0bHeiRNg v1.1.0 File reading failed: VLC could not open the file "http:\/\/v13.lscache6.c.youtube.com\/videoplayback?ip=71.0.0.0&sparams=id%2Cexpire%2...