VLC 1.1.1 was just released! A lot of bugs were fixed, and now, GPU decoding works on ATI cards! You need Catalyst 10.7 to use DxVA on your ATI GPU.
Other important news: libVLC has a lot of new useful functions, like libvlc_set_user_agent(), or libvlc_video_set_callbacks() and libvlc_video_set_format() to replace the --vmem-* hack.
Enjoy this new release!