I doubt if Xylobot uses an actual video overlay, they're pretty much only used for viewing video via DirectShow. I know they're not even exposed in DirectX8, you have to use them via the DX7 interfaces so I doubt you could display one over EQ (I've not tried, however). I hear they're making a comeback in DX9.
The most likely method Xylobot uses is to hook the DX calls to CreateDevice() in a similar way EQW does and obtain surface interfaces from there. Back in the DX7 days you used to be able to call GetDC() on these DX surfaces and then you could do all sorts of funky stuff with the windows API. Can't do that anymore though :(
K.
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