orbitalpunk, it's been demonstrated that software players on the Windows side do compete with and surpass standalones. There's a whole confusing, disjointed cottage industry that's sprung up feeding the Windows crowd fervor for better dvd processing on their PCs.
For having no firsthand knowledge lsarver has done a darn good job summarizing this forum's feelings, I think.
There were people around here, me among them, who hoped Tiger would bring about some improvement in Apple's forlorn dvd player app.
Most of the people here who feel it does a good job "deinterlacing" and "upconverting" don't have that much hands-on experience with good standalone players--if they did they'd have had a few standalone upscaling players by now, would have had them for years--or would be running an HTPC with Windows already for its better post-processing abilities--and would be in a position to compare. They mean well, but on this particular issue are misguided.
It's been discussed a million times here. Find the threads, try it for yourself, read outside this forum, like in the long dvd player forum threads where folks have spent much time imparting knowledge on this issue, learn about "upconversion" and "upscaling" and how a player reacts with a given display type and you'll find out that what the Mac and Apple dvd player does is NOT what the good standalone players do. A dvd upconverted at 720p is not fed equally. The eyes don't lie, especially on big digital screens, especially if you also learn how to calibrate your display. Decide for yourself whether that difference matters to you--but don't delude yourself into thinking otherwise. And if you don't have a lot of experience with the better upscaling dvd players you probably shouldn't state an opinion on this--it won't even take a Faroudja chip in a standalone or an Oppo to kick some Apple dvd player app butt. Well-chosen (for your display type) but still lame ass (in the grand scheme of things) inexpensive sub-$100 progressive standalones with HDMI or DVI easily surpasses it.
Sorry to come off with this wizened tone, but this is one of the subjects that's been hashed and rehashed for years. If you want superior dvd playback with your Mac, you won't find it with OS X. Yes, improvements in Apple's static dvd player app are rumored to be coming in Leopard--but those improvements seem more interface-releated than processing. Apple forsook that app long ago--and at least in my case helped move me forward to HD that much sooner, which the Mac has always handled much better than PCs.
Dvd is less about processing power as wildrock says, it is processing and post-processing. The Mac does a far better job playing back HD than it does a dvd--HD to HD. HD displays tend to reveal and exaggerate flaws when you play back sd material--it's just the nature of the beast when you're dealing with something that's 720 x 480 and so compressed anyway. Play around critically, you'll see that apple dvd player app doesn't do as good a job of squeezing blood from that turnip as other methods. Then decide how invested you are in that old medium before you move forward.