If the movie is using a high bit-rate and/or a heavy duty codec such as h.264/x.264 and you haven't done the necessary work to integrate VDPAU with Xine, then yes video will stutter.
Even 720p using x264 codecs will be beyond the capability of the Atom CPU to process unless the bitrate is extremely low (to the point of being unwatchable quality, probably!).
You would need hardware acceleration from the nVidia chipset of the video decode, to get smooth video. And that mean integration of VDPAU.... which is not currently there yet with LMCE.
Whilst you are waiting for that, you can use lower codecs (MPEG1,2 and some 4, some WMV, Divx, etc) which form the bulk of media in the SD range.