Quote - All the copyright information is is something that tells whatever is handling the data what it is allowed to do with it.  A device that does not adhere to the policies will not be allowed to have a key, and thus won't be able to do anything with the data anyway.

If you take any DVD with copyright information, extract it data by mean of any existent sofware with current Windows, Mac or Linux and then you burn a DVD you will have a new DVD with exactly the same movie but without any copyright information or encryption.
Vista will handle this new DVD as a copyright-free DVD, so pirate DVD will be able to run without any problem in Vista.

Quote - Wrong.  The data on the disc itself is encrypted.  Vista handles the decryption and playback; the software application only has to provide remote control (Play, Fast Forward, etc) and will not actually handle any of the decrypted data.

But it doesn't work in this way, what a computer does is read the tracks and sectors of the disk and do what it wants with the sector data. Play, Fast Forward are only software functions.
What software does is to issue a command by the IDE interface requesting the reading of sector #xxxx, then the IDE player will sent an interrupt request to the CPU when this sector is ready to be read, then the software issue a read command to the IDE interface and have the sector data.
This sector data can be a fragment of copyright information, a fragement of a movie video or a fragment of a Poser's pz3. It's the software that decides what to do with this data.

Quote - Home DVD players and computer DVD drives are two very different animals.  The computer drive reads the disc and sends the requested data to the IDE controller, which then gives the data to the operating system.  The data sent down the IDE bus is the raw, unencrypted data straight from the disc.

There are no different animals, they are exactly the same, the chips used internaly are the same.
What is missing in the computer player is the keyboard, lcd panel, programming processor and tv output and is added the ide interface to the existent internal data path.

Quote - You could patch the firmware to do the decryption for you, but then you could just write a software application to do the same thing.  Either way, you would need a key.

The key is hardwired in the home dvd player, it's only a question of design of the computer DVD player.
Some computer DVD players have a digital output, what Microsoft want to be removed. If the DVD player has a digital output it means that its firmware decrypts internaly any crypted content and send it to the digital output, no computer involved in this process!!!
You see, you don't need any key, the player firmware can do all for you, you only need to have to right player for your needs.

Stupidity also evolves!