I'm also experiencing this problem, but with totem-gstreamer instead of
totem-xine. VLC plays the files without artifacting.

I think both xine and gstreamer use ffmpeg, which uses the x264 decoder,
which is written by the same people who write VLC. Is it possible the
Feisty libavformat package has an older version of x264 than the Feisty
vlc package?

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Green artifacts playing H.264 MKV files
https://bugs.launchpad.net/bugs/123476
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