My clips play perfectly, vlc does not drop frames for me. I can even play the 1080p h284 movie trailers from apple.com without dropped frames.
Powermac 2x2GHz, 1 gig ram. Video card won't matter since VLC isn't accelerated by the graphics card anyway.
Try using vlc 0.7.2 instead of 0.8.x. At least on my computer, version 0.7.2 only requires around 40% cpu whereas 0.8.x takes up almost 100% on the same 1080i clip with deinterlacing set to blend on both.
0.7.2 can't both crop and deinterlace though, you have to pick one or the other
I use 0.8.2 because of deinterlace:crop and since Apple updated the firmware that controls the fans, the little annoying one right behind the harddrives never spin up anymore so I'm not disturbed by the fact that vlc 0.8.2 needs 100% cpu.
If you know how to compile, you could probably get a performance boost by compiling a G5 optimized version of 0.8.2 (or 0.7.2). If you figure out how to compile 0.8.2, please post a howto on the forum
Or better yet - upload it somewhere so I can download it! I have tried to compile a lot of different vlc versions and it never works for me.