The following works for pause, I can do fullscreen and a bunch of other commands.

from .lircrc
begin
button = pause
prog = mplayer
config = pause
end

What I cant figure out how to do is map the navigation keys to keypad 4, 8, 6, 2 and 5.
I would really like to navigate the menus with my remote control.

begin
button = cursor-left
prog = mplayer
config = ???? << what goes here?
end

Two things: first, mplayer doesn't do DVD menus. You'll want to use xine (or one of its other frontends) for that.
Second: xine's default navigation keys are 8, 4, 2, 6, and KP_Enter, which should be easy to map in your lircrc.

I have used mplayers DVD menus for a bit now:
mplayer navdvd://
It uses keypad input (will not accept cursor keys) to navigate the menu system or if executed with -mouse-movements you can use the mouse to make menu selections.

excerpts from the manpage
~snip~
mplayer [dvd|dvdnav]://[title|[start_title]-end_title] [options]
~snip~
keyboard control
~snip~
(The following keys are only valid if you compiled with dvdnav support: they are used to navigate the menus)
keypad 8
Select button up.
keypad 2
Select button down.
keypad 4
Select button left.
keypad 6
Select button right.
keypad 5
Return to main menu.
keypad 7
Return to nearest menu (the order of preference is: chapter->title->root).
keypad ENTER
Confirm choice.

I have used mplayers DVD menus for a bit now:
mplayer navdvd://

Ah, cool. Last time I checked was a while ago, and dvdnav in mplayer was so broken that it was disabled.

Finally figured it out

begin
button = pause
prog = mplayer
config = pause
end

begin
button = up
prog = mplayer
config = dvdnav 1
end

begin
button = left
prog = mplayer
config = dvdnav 3
end

begin
button = ok
prog = mplayer
config = dvdnav 6
end

begin
button = right
prog = mplayer
config = dvdnav4
end

begin
button = down
prog = mplayer
config = dvdnav 2
end

begin
button = stop
prog = mplayer
config = quit
end

begin
button = skip_forward
prog = mplayer
config = seek_chapter +1
end

begin
button = skip_back
prog = mplayer
config = seek_chapter -1
end