stefansundin

You need to change to the playlist view and then pick the quality you want there. Alternatively, click the Next button to change to the next playlist item, which will be lower quality. - Feb 17 2019

The extension worked really well for me, and seeked within a few seconds of where the web player started playing. The only annoying part is that I have to activate it each time I start VLC. - Jun 20 2017

Good news! I got it to work by also making a VLC extension. The extension will be notified when you open an input, and if it's a twitch.tv URL with a timestamp, it will seek to that position for you. Compared to manual seeking it is very precise, almost as good as the web player.
So if you want to use this then you need both this playlist parser installed and the extension. Unfortunately you must activate the extension each time you start VLC (I have not found a workaround for this yet).

Get the extension here: https://gist.github.com/stefansundin/c200324149bb00001fef5a252a120fc2#file-twitch-extension-lua

Let me know what you think. :-) - Jun 15 2017

It seems like it should be possible, by setting a playlist option called "start-time", but I just tried it and it doesn't seem to work. I think VLC doesn't remember it when it goes out to read the m3u8 playlist file. I can't get it to work, sorry.
If you try one of the recent nightlies for VLC 3.0, you can actually see the time remaining. Seeking is still not that great though. I tried version "vlc-3.0.0-20170426-0444-git" on Mac, and I could see the time there. The nightlies are a bit in flux, some versions work very badly while some work better. You might have to test around a bit. Go to nightlies.videolan.org to find a build.
Thanks for the comment! - Jun 13 2017