I hear ya brother! I'm running a 333 Lombard with BTO DVD hardware. I can't imagine that it would be all that difficult to add hardware decoding functionality to the DVD player. Maybe it's something Apple's working on, but didn't make the cut (kinda like full support for our Rage Pro video cards).
It's hard to say. The original DVD player that came with Mac OS 8 (or a little bit later) was actually written by a programmer from ATI. Why Apple would not want to use that code is beyond me, though. One question, though. Does anyone know if computers with hardware DVD support (Blue and White G3s, say) will still be able to play DVDs, but only through software mode?
ATI Rage 128 or later ATI cards and all supported Nvidia cards are required for software DVD playback, so those of us with lowly Rage Pro cards are SOL. It sucks too. I think it's time to start sending feedback to Apple saying we want our DVD hardware decoders to be supported.