There is one package that is gumming up the works. I went through the list, installed each package individually, and read the output of what was going to happen. The "libva1" package is what is in flux right now. If you force that package, it will remove VLC. Ignore that one package and update the others. Soon enough, that libva1 package will get "fixed" and then it will update properly. Things such as this happened with both Lenny and Squeeze during the testing period in which I participated. It comes as part of the deal.
Yes, you can downgrade to Stable or upgrade to Unstable for that package on a temporary basis, but if you wait a few days, this will get itself worked out. With Testing, these tiny glitches are going to pop up every so often. A good practice is to NOT upgrade everything without reading the output of what the result will be. Running Testing is easy, but it is not flying on autopilot.
Edited to correct a typo. Changed libav1 to libva1.