To anyone interested:
Here is how to watch movies through Launchbox paired with VLC media player.
Go through the motions to add a movie just as if you were adding a game.
Enable the emulator option.
Name the platform as you see fit, I used Movies.
Next browse to the vlc.exe, this will allow vlc to run.
Next in the command line area add --fulscreen --no-spu
--fullscreen will make vlc go fullscreen and --no-spu will disable subtitles, if you want the subtitles then leave off the --no-spu
You will have to enter all the data for the movie yourself ex;genre, year, publisher. I lack the talent to programme Launchbox to retrieve this information from a database online. Also you will have to load box art and fan art manually.
To load say the front of a dvd box, go into your Launchbox directory, then images, then locate the directory that matches the movie you added. There will be an alpha-numeric coding after the name, just ignore that. Go into the matching movie directory and load the box art you want but name it "Front.jpg" without the quotes. It must be named that exactly or it will not work.
If you want to add the back box art do the same thing just name it "Back.jpg" as well without the quotes.
Now for the fan art. There will already be a directory named fan art. Just drop the picture or pictures you would like into this folder.
I would recommend a picture that matches your screen resolution so it looks nice and clean. Personally I'm using 1920x1080.
Now if some of the art work seems not to be showing, first make sure you have the proper naming for the Front.jpg and Back.jpg, secondly in Launchbox got to tools at the top and select refresh all images.
It's a little work until someone gets a database retrieval script and scripting for retrieving art work but it's a step in the right direction and something to pass time. Please feel free to contribute to this.