Adding the kernel option: clock=pmtmr to my GRUB conf fixed a similar problem with the following setup:
NVidia Geforce4 MX4000
MSI K8T-Neo2-F V2.0 (bios revision 3.2)
Athlon64 X2 3800+
With smp kernel 188.8.131.52 and nvidia driver version 1.0-7667, anytime I used multiple xv overlay ports(mplayer -vo xv) in XWindows, the windows would get all confused and mix the video.
A tail of the /var/log/Xorg.0.log would show a ton of the following warnings from the NVIDIA kernel module:
(WW) NVIDIA(0): WAIT (0, 6, 0x8000, 0x00004818, 0x00004818, 0)
sheds some light on the difference between the three timers available in linux: clock=pit, clock=tsc, and clock=pmtmr
Using the pit or pmtmr timers fixes my problem, though getting the time is a bit more computationally expensive. So something about SMP and the tsc timer mixes up the clock.