1. Mesmo que eu tenho as alças para o ctrl + c dá um largo segfault
2. syslog não LOG_ERR log evento com log mascarados especificado ou não especificado, ele registra LOG_WARNING no entanto ...

#include <sys/types.h>  /* include this before any other sys headers */
#include <sys/stat.h>
#include <fcntl.h>
#include <string.h>
#include <assert.h>
#include <syslog.h>
#include <errno.h>
#include <sys/wait.h>   /* header for waitpid() and various macros */
#include <signal.h>     /* header for signal functions */
#include <stdio.h>      /* header for fprintf() */
#include <unistd.h>     /* header for fork() */
#include <stdlib.h>   
void  ChildProcess(void);                /* child process prototype  */
void  ParentProcess(void);               /* parent process prototype */
#define DAEMON_NAME "mplayerdaemon"
#define PID_FILE "/var/run/mplayerdaemon.pid"

/***********************************************************
  Function: signal_handler
  Description: Handles signals the daemon might receive. 
               Gives the daemon enough time to properly shutdown

  Params: sig : The signal(int) received
 *********************************************************************/
void signal_handler(int sig) {
 
    switch(sig) {
        case SIGHUP:
            syslog(LOG_WARNING, "Received SIGHUP signal.");
            break;
        case SIGTERM:
            syslog(LOG_WARNING, "Received SIGTERM signal.");
            break;
        default:
            syslog(LOG_WARNING, "Unhandled signal (%d) %s", strsignal(sig));
            break;
    }
}

int  main(int argc, char *argv[])
{
#if defined(DEBUG)
    int daemonize=0;
#else
    int daemonize=1;
#endif
    
    // Setup signal handling before we start
    signal(SIGABRT, signal_handler);
    signal(SIGHUP, signal_handler);
    signal(SIGTERM, signal_handler);
    signal(SIGINT, signal_handler);
    signal(SIGQUIT, signal_handler);

    syslog(LOG_INFO, "[INFO] %s daemon starting up",DAEMON_NAME);

#if defined(DEBUG)
        setlogmask(LOG_UPTO(LOG_DEBUG));
        openlog(DAEMON_NAME,LOG_CONS | LOG_NDELAY | LOG_PERROR | LOG_PID, LOG_USER);
#else
        setlogmask(LOG_UPTO(LOG_INFO));
        openlog(DAEMON_NAME, LOG_CONS, LOG_USER);
#endif

    /* Our process ID and Session ID */
    pid_t pid, sid;

    syslog(LOG_WARNING,"[ERROR] testing error");
    daemonize=0; //for debug purposes only
    if (daemonize) {
        syslog(LOG_INFO, "[INFO] starting the daemon process");


        /* Fork off the parent */
        pid = fork();
        if (pid<0) {
            exit(EXIT_FAILURE);
        }
        /* If we got a good PID, then 
          we can tell the parent to exit*/
        if (pid>0){
            exit(EXIT_SUCCESS);
        }
        /* Child will always have a 0 if successfully created*/

        /* Change umask so that the program will have access to all child files */
        umask(0);

        /* Create a new SID for the child process */
        sid = setsid();
        if (sid<0){
            syslog(LOG_WARNING,"[ERROR] Error while getting new session id, error code : -1");
            exit(EXIT_FAILURE);
        }

        /* Change the current working directory */
        /*
         if ((chdir("/")) < 0){
            syslog(LOG_ERR,"Error while changing directory error code : -1");
             exit(EXIT_FAILURE);
         }

         */

        /* Close out the standard file descriptors 
           Because daemon won't be accepting input from console */
        close(STDIN_FILENO);
        close(STDOUT_FILENO);
        close(STDERR_FILENO);
        
    }

    while(1){
          int rc=system("ps -C mplayer -opid=");
                        
          rc = WEXITSTATUS(rc); /* Check if mplayer is running */
          printf("I was here pid: %d\n",rc);

        /*if mplayer quits unexpectedly */
        if(rc > 0 ){
           
                 launchmplayer();
                 sleep(2);
              }

     }

    /* if loop breaks daemon exits*/
    syslog(LOG_INFO, "%s daemon exiting",DAEMON_NAME);

    exit(0);
}

void launchmplayer(void)
{
     system("mplayer ~/test.avi");
     return;
}

O OS / arquitetura que você está usando? Eu tentei usar o Linux e apesar de o código não compilar num primeiro momento, trabalha muito bem e eu não receber um sigsev.

Lembro-me de uma vez tive o mesmo problema, mas ele estava em uma arquitetura diferente para i386.

Padrão do kernel do ubuntu 9,04
I386 Archetechure