Note: XBMC is open source (GPL) software and as so the source code is available for anyone to modify and/or compile (under the rules of the GPL).

Compiling Mplayer for XBMC

Prerequisites

If you have TortoiseSVN, you can skip the first two steps.

Get TortoiseSVN installer from the TortoiseSVN site
Install TortoiseSVN
Right click in a directory and click "SVN Checkout"
Enter URL of repository: https://redmine.exotica.org.uk/projects/xbmc4xbox/repository/xbmc4xbox/show/trunk/mplayer in the dialogue window. (Note this will only download the Mplayer branch)

To build mplayer you need to download and install msys.

Get MingW 4.1.0 from SourceForge
Run and Choose Full (It will download about 45mb in total)
Get MSYS from SourceForge
Install MinGW to C:\MinGW (The root is the best place)
Install MSYS
Complete the questions you get after the install in a command window
Get GCC Core 3.4.4 from SourceForge
Extract GCC-Core to a temporary folder, then copy bin,lib and libexec to the MinGW folder and overwrite

You should now have both the source and the building environment to compile a Mplayer.dll

This part of the how to assumes that you did install MinGW to C:\MinGW and download Mplayer to c:\mplayer-xbmc

Run MSYS.BAT (located in C:\Msys\Msys.bat)
Command Window should show type cd /c/mplayer-xbmc
Type ./configurexbmc --disable-libavformat (Use the --disable-libavformat to shrink the dll further. May cause compability issues with certain codecs, yet to be determined)
Wait till that finshes, with luck it should have no errors/problems
Type make
Type makedll
Type exit