A few other things about VideoLAN that might be relevant to using it like this:
Here's a way to overlay something on the video (like the privacy filter on the Axis cameras):
http://www.recipester.org/Recipe:Ove...yer_3 3186770
Here's a way to 'float' the video without the frames in an overlay.
http://vollnixx.wordpress.com/2011/1...rlay-with-vlc/
If you dig around in VideoLAN you'll also find that you can basically control all it's functions remotely from devices that can't even run VideoLAN itself. For example it can run a telnet server you can connect to and issue it directions.