It must only be the beta drivers it was fixed in then -- was fixed as of at least 304.48 if not sooner.
I watched the bug reports, the changes to the GIT repository and the fix from an NVIDIA developer filter through a couple of months ago.

As of the wee hours of this morning, my time, 304.43 was the latest driver, but I'll check again and see if anything new has been posted to their web site.

304.51 was released today

Well, here you go. Installing 304.51, didn't make a bit of difference:

You'll still get blue people with 304.51, if you don't disable hardware acceleration.

Blue people don't bother me much.

That's extremely odd, I don't see the problem with 305.48 or 305.51 with hardware acceleration enabled.
I also know that NVIDIA have had a patch for this since January.
I wonder if it's only fixed for some cards?

Possibly. Mine is a GTS 450.

I bet they would if you met a few in real life. :)

Whose fault is this problem: Adobe's or Nvidia's? We all know Adobe doesn't give a **** about Linux, so I'm inclined to point the finger at them.

Seems to be Adobe's. They call VDPAU incorrectly or something -- there's discussion on some NVIDIA forums but it's a little technical for me. One of the discussions is here:
http://www.nvnews.net/vbulletin/showthread.php?t=177380

These two, mentioned in that forum thread, seem to work:
/etc/profile.d/fix_flash.sh
/etc/adobe/mms.cfg

Binary Blob, but an older version as the newer 3xx series lost some functionality.
I found out the hard way that using the 3xx series drivers breaks the RandR extension (Alt+CTRL+[+/-] do not work any longer the driver only supports rotation... so I use the 270 series since the functionality is not missing in that driver and my card is old enough to negate any befits the newer drivers have to offer. (I am running on a 9600m GT)

Many thanks! The combination of those two fixed the blue skin tone problem.
:hattip:

still using proprietary but might switch eventually