Can confirm this bug with "ati" free driver. 
Can not play "Experience Ubuntu.ogg". VLC + totem show similar problem. sound 
works.
7.04 no problem here.
beta 7.10 + latest update + 6.7.194-1ubuntu1 + DRI off (Bug #144297) => garbage 
screen in totem and VLC player.
beta 7.10 + latest update + beta 6.7.194-1ubuntu1tv6  => garbage screen in 
totem and VLC player.
Waiting for new release 6.7.194-1ubuntu2 for re-test.

Does "gst-launch playbin uri=file:///path/to/video" do the same? => Yes

I can only "FIX" this problem by installing the propertary ATI "fglrx"
driver.

-- 
Video dosen't play correctly in Totem
https://bugs.launchpad.net/bugs/134370
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