Is it possible to do this yet? Like have vlc player open 1/4 the size of your screen in a game but transparent ? I know it already possible to watch youtube videos and surf the web while gaming but what about watchinging a dvd movie?
Sure it's possible - but it depends on the game you're playing. Also, a second monitor does wonders. I've got WoW - windowed mode (that's the key) on one monitor and the DVD or whatever video on the second. If you have a game that can do windowed mode, you ought to be able to resize it so you could squeeze both onto one monitor, but they might end up tiny since the real estate isn't quite designed to do something like that
If the player supports On Top and Transparency plus the game can be run in windowed mode I don't see why not. Just run the game as close to the screen's native resolution as possible (some games, like WoW, offer a "fullscreen-windowed" option - best solution) and you should be fine.
If you mean an overlay application, like the Rogue for browsing, I haven't seen anything yet. Not to mention Rogue ain't working so great... However, I have two screens and I put a movie on one (fulscreen) and play a fullscreen game on the other. Works without any problems. You need 2 screens for that, obviously