I happen t use VLC, but what I failed to mention is that it works with any Video Player.
Well, a few days ago I was amused to see a question asking if someone could set a web page as wallpaper, and the answer was a definitive 'no', followed by various ways to use capture programs and scripts to take a screen shot of a web page ans post it like a slide show at set intervals.
The real answer though is that is is dead easy to set a web browser as wallpaper. Not only that, but I often have Google Earth as my wallpaper. I have full access to all the functions, but I turn off the side bar etc so unless someone who knows me sees it, people think it is just a picture of earth from space. It is only when I zoom in or move around while it is still obviously wallpaper, that they realise.
Ok, so basically you open your program. It doesn't really matter what but be warned, if you do this with a file browser, you WILLaccidentally delete stuff (sorry for yelling). I recommend webbrowsers, video players and Google Earth for starters.
Now..
Right click the title bar
Choose Move to Desktop > All desktops
Choose More Actions > Keep below others
Choose More Actions > Fullscreen (alternatively, double click on the running video)
The Program should now run underneath any panels, docks and applications - with NO title bar or status bar etc, just like wallpaper, but you can still do things when you click or right click on it.
Now, the fun part. Because you now have no title bar, you cannot use the right click menu to get out of wallpaper mode. On some programs you can right click on any area of the program and exit full screen. On some others you can double click on an area of the screen to get out of ful screen.
But on many, you cannot. So remember, and write this down, and learn it, before you try the steps above..
ALT+F3.
That should give you the same title bar right click menu that you used to get into this mess.
Have fun. It is not a lot of use on single monitors, but on a dual monitor system it can be neat to have a series of music videos playing on the spare screen while you do stuff.
I have KDE set up so I can scrol the mouse wheel on title bars to make any window translucent, so I can work and still have my background program visible beneath whatever I am working on.
A useful (for me) example is that I can set a web browser open at my mail inbox,and make whatever I am working on translucent for a moment to check mail, or even leave it slightly translucent.