I fixed my DVD playback issue again (I think), and managed to fix playback through VMC. There is a small program called VMCC.EXE that can change your default Vista Media Center codec. I currently have a demo of TheaterTek installed on my computer, which installs an nVidia codec (it will be interesting to see if this is still available to me after the trial is up). I switched my video and audio codec to the nVidia one, and I can now play DVD's in VMC.
I also read that the nVidia drivers have a horrible time with multi-threading for you multi CPU folks such as myself. This apparently can be fixed two ways, you can change the affinity, or you can bump up the processing (have no idea why this works) in the nVidia control panel. You need to go into the television color settings (the one with the inverse telecline check box) area and bump up the edge effects and what ever the other one is to 25%.
Doing a combination of these two "fixes" seems to give me smooth playback with regular DVDs (and they look beautiful).