If the audio and video don't line up or if there are artifacts and skipping it might be that your computer is too slow for it. I have issues on a P4 Prescott 3.06 GHz. VLC uses GPU acceleration (don't think XMBC does) and a less bloated codec filter.
Try new codecs (codec Filters). I swear by CCCP, but some prefer KLite and others. CCCP works well on older machines IMHO.
VLC won't work with it. VLC is all inclusive so it needs no system codec. Media Player Classic Home Cinema is included with CCCP. You might want to download it by itself to get the latest version, but if you tweak the settings a bit you can play HD video better than anything else I've used.
Hopefully CCCP fixes it for you though on XMBC. Good luck.
P.S if you set VLC for system codec it doesn't really work like it should. Also VLC is now2.0.1, just to make sure you have the latest.