The i810 driver (versions 1.7.0 and above) need a patch to get Xv working on the i965 video cards. Otherwise starting any Xv application causes X to crash. The patch, by one of the Intel X devs, can be found at https://bugs.freedesktop.org/show_bug.cgi?id=8594 I simply copied the 1.7.2 ebuild and created an -r1 in my local overlay, adding: PATCHES="${FILESDIR}/${PV}-fix_xv.patch" (that file being exactly what Wang Zhenyu posted in the bug discussion linked above). This patch fixed the Xv issue for me and at least one other person, and based on list discussions it seems several people have had this exact problem with the 1.7.x i810 drivers.
We'll add this once its accepted into upstream GIT. For the time being, feel free to keep your modified ebuild in an overlay.
The patch has now hit git mainline
Fixed in 1.7.2-r1.