If you have enough CPU and graphics power, it can play a AVC/H.264 .m2ts file. I cannot get VLC to play a VC-1 file.
So you if you use it with AnyDVD HD you can extract .m2ts files from some of your BluRays/HD-DVDs and play them in VLC. You can probably even play them directly from the disc.
This requires hunting through the disc structure and finding the right .m2ts files, much like you used to have to do with DVDs in the early days before VLC understood DVD menu structure.
Some movies will play in other languages because the English audio is in DTS-HD MA, TrueHD or PCM, formats that VLC doesn't understand. So it selects the first track it understands, which is a non-English Dolby Digital audio track.