VLC is an extremely sophisticated program for doing video transcoding, etc. It's a testament to the developers that it became known as a good way for regular people to watch videos, despite apparently never being intended for that role. It was never designed for regular use as a video player, and it shows. The UI throws up huge, complex dialogs without provocation -- for instance, when a naive user clicks "Open file" instead of "Quick open file." Despite all the complexity, a bunch of basic conveniences are missing, such as menu items for recently-viewed videos. There's a general lack of polish -- for instance, the progress indicator moves in bigger jumps than it should. The menu layout conforms to no precedent and no user expectations except VLC's own.
There's only one outright bug I know of, but it drives me crazy sometimes: if you want to click on the thingy that indicates where you are in the video and drag it back and forth, you can't just click on it. If you do, the video will jump backwards just as if you clicked on the progress bar to the lift of the indicator. You have to aim a little bit to the right. Usually I aim a couple of pixels to the right of the rightmost edge. That usually works, but sometimes the "sweet spot" is a little to the right or to the left of that spot. Also, while you drag it and right after you let go, the video does a Ma-Ma-Ma-Ma-Max Headroom shake.
All in all, it's a real testament to the technical quality of VLC that it has become so popular with the UI it has. As far as I can tell, most people know about and use VLC because one day they ran into a video file that only VLC handled properly. (For me it started a long time ago with mp4; now I use it for flv and whenever my other video players screw up a DVD menu system.) If all video players handled all files well, VLC would just be used for its more advanced features like transcoding, not for playback.