Since I was going to update to Saucy soon I didn't bother doing this in raring. I compiled vlc 2.1.2 (the latest stable) in Saucy and vdpau definitely works, though not as good as mplayer/mplayer2.
The libvdpau version in saucy is up to date, but to get libavcodecs >=54 so you need an up to date version of ffmpeg. You can compile it yourself,--but must enable shared,-- but there is a new ppa that features real ffmpeg https://launchpad.net/~samrog131/+archive/ppa (Jon Severinsson's ppa is well known but it is too old for compiling vlc 2.1.2) It installs ffmpeg in /opt/ and you can install as well the package ffmpeg-set-alternatives which will then allow you to choose which ffmpeg to be the system default (command: sudo update-alternatives --config ffmpeg then pick the one, which will create a symlink to /usr/local and its target changes depending on the update-alternatives command)
Then install the dependencies (either sudo apt-get build-dep vlc or copy the list from andrew.46's guide linked in the first post but some of the packages listed may be outdated (libhal?) and no longer in the repo ) After installing the dependencies install the ffmeg-real-dev files from the ppa.This will remove the corresponding libav-dev files in the system. So if you intend to run sudo apt-get build-dep vlc to get the dependencies you should do this after, or apt-get build-dep would not run because the libav-dev files are uninstallable.
Download tarball for vlc 2.1.2 from videolan, untar, cd into it and run ./bootstrap. Before configuring run
This is to instruct the build process to find the correct ffmpeg libraries (libavcodecs etc) from the ppa. I am not sure if it is necessary after setting the ppa's ffmpeg to be default. But I did it anyway.
export CPPFLAGS LDFLAGS PKG_CONFIG_PATH
Then just ./configure make and sudo make install (or sudo checkinstall)
Don't need to supply any option to enable things since vlc 1.5 or something, it picks up on its own which features can be enabled on your system.
Once vlc is installed successfully (in user/loca) run , since I haven't removed vlc2.0.8 before I compiled and it was in /usr. If you remove it first then you don't need to do this.. (I couldn't ./configuring vlc with prefix /usr because I couldn't remove all vlc packages yet,--because of phonon-backend-vlc,--and that caused a conflict)
Finally I had problem with phonon-backend-vlc because the repo version doesn't work with vlc2.1.2 so I have to compile 0.7.1 from source and for that I needed a newer version of phonon (repo's version gave errors about unknown qt5 symbol or something, even though this uses qt4), which I got from https://launchpad.net/~mati75/+archive/mint-lxde
Finally I removed all packages associated with vlc2.08 since phonon-backend-vlc didn't depend on them any more. I only keep vlc-data because it contains icons and stuffs like that.
Now everything is working. As a bonus I can open some .flv files that I wasn't able to in Ubuntu or Debian because these distros compile their mediaplayers with avconv, instead of ffmpeg and avconv for some reasons cannot play these files.