This is a nice idea in concept. While it doesn't at the moment support it, it wouldn't be a stretch to implement.
That being said, VLC on the Pi is already quite sub-optimal, having it stream a video from YouTube, unless we can specify the quality of the stream to be one of the lower ones (and even so) might be a bit more resource intensive than ideal for the little Pi.
Might be worth testing out rendering a random videogame snap that would come from ArcadeItalia via VLC in the command line, and see how it'd perform, and then decide whether it's worth investing in it at the moment. That'd be my recommendation.
OMXPlayer also allows for that, but it requires a bit more tweaking.
Anyway, for non-Pi systems, and for users who'd be permanently online and have good bandwidth, that would be a welcome addition I imagine.
That being said, a bit of a cautionary tale: given that neither VLC nor OMXPlayer are using any sort of official API, things might break at a moment's notice if things change on the YouTube side of things. Been there, had that happen a few times with such things.
Thanks!