I'll throw in my $.02, at this point, purely from a non-technical POV. XPSP2, ATI IGP 9100, Celeron 90nm, OC'd to ~3.2Ghz.
I use 3 apps for MPEG2 video playback (DVD): Media Player Classic, VLC and to a lesser extent, MC12. The reason I don't use MC12 right now is that there is something that MC12 is doing in relation to my onboard ATI IGP that is not quite kosher with FFDshow (which I'm using for decode/filtering).
With VLC, using VMR9, I get about the same image quality as using MPC/MC12 w/FFDshow and VMR9, but the load on the CPU is much, much lower using VLC. This applies to the use of the Overlay Mixer/Renderer as well re: CPU load. Output colorspace changes results in similar perf and quality as well. Quite amazing and I'm guessing that VLC is either using tweaked assembly code or is somehow smart enough to offload to the video hardware, it's probably both. Either way, using both playback options, the image quality is quite impressive.
When using MPC w/FFDshow, you have much more flexibility to tweak the image and load constraints, using VMR9 or not. VMR9 in general, gives a much more 3D look to the image and the colors are more vibrant than using the legacy video renderer. That said, I think my config is near the low end in terms of getting optimal perf using FFDshow/VMR9 as I do get jaggies on fast transitions sometimes.
Also, I'll throw this out, each config is different and will give different results, so you might have to play around with it for a while to figure out what works best for your particular setup.