Since I've spent a few hours of my time tracking the source and potential workarounds for this annoying bug, I figured that I may as well document my findings here. The latest Linux kernel (i.e. 3.6.0 at the time of writing) has a bug whereby if you play any audio file in VLC and try to change the volume, you'll hear a very annoying amount of audio distortion/noise. However, neither mplayer nor gstreamer-based players (Rhythmbox, Totem, etc.) seem to be affected (at least, not for me). More details available on the LKML. I don't seem to be the only one affected at least (e.g. LKML#1, LKML#2, alsa-devel#1, alsa-devel#2, bugzilla).
Workarounds: (obsolete, see update below)
1) Revert this commit and re-compile your kernel.
# echo "options snd-hda-intel position_fix=2" >> /etc/modprobe.d/alsa-base.conf # alsa force-reload $ pulseaudio -k
(Or just reboot instead of reloading ALSA modules + restarting PulseAudio.)
I'll update this post if I find other workarounds, or if my diagnosis of this bug is completely off. In the meantime, I'm off to enjoy some distortion-free music with VLC.
Update: Fixed in 3.6.2 (and 3.7): patch can be found on the LKML.