I can confirm too, running Feisty, xine backend and proprietary NVIDIA
drivers.

Bizarrely this wasn't an issue for me under Edgy.

I don't know if it's connected but I have a problem where if I operate
the controls in fullscreen mode the mouse pointer doesn't disappear
again. Can someone advise whether to file this as a separate bug?

-- 
Controls do not disappear completely in fullscreen
https://bugs.launchpad.net/bugs/41117
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