It plays avi/divx/etc just fine, like you mentioned, but the video stutters pretty bad with my backedup m2ts files (even the very, very small ones). Audio plays thru the digital toslink output (without stuttering), and I've selected the 5.1 audio option, but vlc isn't really outputting dd5.1 (my receiver doesn't see it as 5.1).
... using gnome session, of course.
But using Nero Showtime on my laptop, with my laptop plugged into my plasma, it works fantastic. I do see a barely perceptible stutter every now and then, but I assume that's just because I'm using a thinkpad (which are certainly not known for their graphic abilities).
Overall, I'm estatic with what I've learned here this weekend (thanks to hacked and everyone else). I was hoping to use my ps3/linux for watching my backup's, if for no other reason than the fact that half of my actual store-bought BluRay movies freeze up a few times during playback - I just have to wait it out, and then it starts playing again (about 10seconds). But I'll just use a windows box to play my m2ts backup's instead.
I used a combination of the first post and that "thepros.zip" (after reading SoNotImportant and hacked2123's posts) - and then somewhere during that process I installed yumex and then finished installing vlc using yumex.