I tried to reproduce the problem on a borrowed nx7400 with the Hardy
8.04.1 Live CD, but I couldn't using the following procedure:

- System -> Preferences -> Appearance -> Visual Effects to "Extra"
- Open the video file "Experience ubuntu.ogg" which is in the "Examples" folder 
on the Desktop (using Totem)
- Log out and in again 7-8 times and open the file again.

To reproduce it do I need to (a) reboot the computer in between the
sessions (takes forever with a LiveCD), (b) enable more compiz stuff,
(c) open another file or (d) apt-get install some other players?

** Tags added: 945gm intel video xorg

-- 
video overlay hungs up the system on intel945 graphics card
https://bugs.launchpad.net/bugs/278087
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