In fact there is a solution but it isn't pretty.

Canola 2 is using xv in slave mode but it is slower and more cpu consuming than omapfb. However if your osso_software_version reports that you're using 770, Canola 2 switches to omapfb which doesn't embed too well in it, but it is faster.

Also using MPlayer rc2 may help especially with flv files but has some integration issues with Canola 2 if i remember well.