The Roku can play local video files from a USB drive, as long as your model has a USB port and you add the USB media player channel app. It's a bit limited though compared to some other media players that have more local file player capability. The only format it really supports properly is MP4 with H.264 video and AAc audio, but it shouldn't be a problem to produce that format with a DVD ripper if you're just starting out. The Roku app also isn't big on organization or presentation though, so it might be a bit awkward to handle a large movie collection.
Plex Media Server running on a PC/Mac/Linux system and streaming to the Plex client on the Roku is a great combination. It has a much richer interface with metadata, organization and searching, and it can transcode a variety of video formats for the Roku on-the-fly. But it requires your server platform to be running at the same time as the Roku. It also doesn't stream iso rips, but that's probably not a concern for your purposes.