Problem: video is slow when vlc is in fullscreen because of the semitransparent controls
solution: This problem seems this only occurs under Vista or Window 7. On Win7, and VLC is on fullscreen mode the controls are semitransparent and it has made it basically unusable - with very serious lag as soon as you pop up the control panel.
Fortunately, it can be easily solved by running vlc.exe in Compatibility Mode for Windows XP SP3. This disables the resource hogging (and totally unnecessary) transparency effect and retains video performance when the control panel is up.
To do that, right click on the vlc icon and select compatibility mode and xp sp3.