Jack, since it's your office PC, you shouldn't be watching DVDs:-)
But if you must, the OS X players, including VLC, are not very good. They seem passable on perfectly coded DVD, but anything that's not perfect (like most DVDs...,) or anything video (as in TV series, etc.,) will have artifacts. Some are outright hard to watch in OS X (like Tinker, Tailor...,) while showing fine in MCE using the Nvidia decoder.
If you are really serious about HT, you may have to boot into Windows, as chefklc said, until Apple addresses this issue, hopefully with Leopard. But since it's an office PC, you may have to deal with the artifacts....
P.S. While I don't see any video problems running MCE on my Dual 1.6 Mini, it is possible that your G4 had a more robust video card. In addition, it may be that the drivers for your old G4 card were better - Intel's are not the best. It is also possible that the way your monitor is hooked up is different.