This posting is older than 6 months and can contain outdated information.
I did a quick search on the VideoLAN (makers of VLC) forum for
FileVault and a report of a problem identical to yours (just that in
that case, the users drags a folder of movies onto VLC) dates back to
August 2007:
http://forum.videolan.org/viewtopic.php?f=12&t=40188&p=125237&hilit=filevault#p125237
I'm afraid I can't do anything about this problem, since this really
seems to be a general VLC problem with folders stored in FileVault (or
more general: all kinds of OS X disk images).
Since FileVault basically means that your account runs in an encrypted
sparseimage, you should be able to at least work around that problem by
1) either moving the movies out of your user folder (mounted at /Users/
yourusername), f.ex. to /Movies
2) or disabling FileVault for your account.
Please be sure to report the bug to the VLC team, so they are aware of
it and can fix it with future releases.
Best regards,
Felix Schwarz