... and I see that If pause the video it is stopping for a few ms and then decoding a few more frames and stopping again.
If I find the time I will create a video of this behavior.
While we're aware of the issue, there's not much we can do about it. The modern security realities facing web browsers have made sandboxing a necessity.
There's a good explanation of what's happening here: http://blogs.adobe.com/asset/2012/06/inside-flash-player-protected-mode-for-firefox.html
Long story short, each video packet has to be passed from the browser to a medium-integrity broker process, then to the low-integrity flash player process for rendering. If an attacker manages to hijack the Flash Player thread, the process is low-integrity, which prevents the attacker from doing much with it. While it's not an absolute guarantee (nothing in security is), it raises the bar significantly for attackers.
The downside is that all of that extra message-passing consumes CPU cycles, especially if you're trying to fill an exceptionally large buffer as fast as possible. There's not a lot of opportunity to optimize this.
If you're fine with the risk, you can manually disable ProtectedMode on your machine. If you're only dealing with trusted sites, and you're not doing anything critical with the machine (work, banking, etc), then it's probably not a huge deal.
Ultimately, ProtectedMode is like a vaccine -- it's a herd-immunity thing. If the majority of people run it, exploits targeting machines without it are inconsistent and probably not worth pursuing when you look at the effort involved in developing an end-to-end exploit. If a large number of people disable it, it becomes economically attractive for people building botnets, and you'll have a problem if you're not using it.
To disable Protected Mode, add the following line to your mms.cfg file located in:
Windows 32bit: C:\windows\system32\macromed\flash
Windows 64bit: C:\windows\syswow64\macromed\flash
ProtectedMode=0
If the mms.cfg file does not exist, create one using any standard text editor (e.g.. notepad)
Depending on your operating system, you might need to first save the mms.cfg file to a writable location (such as your documents or desktop folder) and then copy the file into the destination folder using Windows Explorer.
To re-enable Protected Mode, simply remove the line from the mms.cfg file.
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