I've posted a test release of VLC 0.9.4 for testing. This is a pretty major VLC update, so we'll be giving this a test before release. The major new bit from a portability standpoint is the media library. Unfortunately, there is no switch to redirect it to the portable drive, so it must be copied to and from the PC at the moment, which may be a privacy issue for some folks (if someone were to undelete files quickly enough... before something overwrites it... they could see what your music collection consisted of, though it's a bit unlikely).
Download VLC Media Player Portable 0.9.4 Pre-Release 1 [15MB download / 16-26MB installed]
Please give it a full test and check for bits left behind in $APPDATA\vlc in particular. Also be sure that it doesn't mess up your current local install, that secondary launches work as expected and that the PortableApps.comLocaleglibc environment variable correctly switches the language.
Please note that the new media library/playlist editor is buggy and will get stuck with blank columns if you hide/unhide certain columns.