Hey. I believe I have the fix for this. I've also fixed another bug I discovered. First the other bug:
URIs with "&" in them get cut off just before the "&". Modified the system() string to enclose the URI in single quotes and it works. Patch attached.
For the original bug, looks like the return of menu_popup() just needs to be tweaked. If VTE reports no matched URI on a button press, return FALSE (instead of TRUE). You'll see this in my patch.
My patch also changes the URI click button to 2 (middle click). This is a better idea IMHO, and it's how at least one other VTE based term does things.
Hope you like. :)