I can see 1080p MKVs (x246/DTS) on an Athlon x5 5050e (2.5GHz) / Gigabyte Mobo with integrated radeon 3200 / 4GB RAM with VLC > 0.9 on a AMD64 Kernel >=.26.
Assuming you don't fold@home and have httpd serving 200 clients, it is more than enough. I never encountered problems with 1080p playback. CPU usage is high but I have a 45W "energy efficient" Athlon with a Zalman copper cooler. The loudest thing in that box is the occasional creek-creek sound of the hdd.
Btw,the "i" in 1080i is for interlaced (http://en.wikipedia.org/wiki/1080i). SO the actual vertical resolution is ~800 pixels. If I can see full frame 1920x1080 x264-compressed video on a 2.5 X2, you can see interlaced ~800 / 720 on a 2.8 X2.
Also, I always build the latest "stable" version of VLC from source, rather than the deb/yum/rpm ones.


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