Have a look at the path
  HKEY_CLASSES_ROOT\Applications\vlc.exe\shell\Play\command
in the registry.

In my registry under Vista 32 EN Business the value is
  C:\Program Files\VideoLAN\VLC\vlc.exe --started-from-file "%1"

Normally, it should read
  "C:\Program Files\VideoLAN\VLC\vlc.exe" --started-from-file "%1"

Windows Explorer accepts both variants but the first one causes problems
when trying to call that command from self-written programs.

Reported by Stefan <vbtricks  gmx.net>