That's odd. There's no doubt you have an MPEG2 codec, probably several. The Power DVD codec, for instance, is a good one. Agree about flashing with latest firmware, try that first. Have a look in the Lite-On subforum at CDFreaks for your firmware:
http://club.cdfreaks.com/forumdisplay.php?f=44
Did any software come pre-installed on your comp? (Or did you or someone else install some ultra-super-mega codec pack? That would be a bad idea.) There's a possibility there's a codec conflict or a DirectShow issue. Put a DVD movie in the drive and navigate to the VIDEO_TS folder, open it and load one of the .VOB files into the latest GSpot. It's free, get it here:
http://www.headbands.com/gspot/
Look at the top right, does it say the proper codec is installed? Then try to "render" the file, any errors? If so run CodecSniper and see if you have any "broken" codecs. Free, get it here:
http://www.videohelp.com/tools?tool=Codec_Sniper
You could also try one more DVD software player. Media Player Classic and Videolan will often play files no other software will, and are capable of playing MPEG2, for instance, without having any MPEG2 codec installed on your machine, and are less susceptible to conflicts. Both free, here:
http://www.videohelp.com/tools?s=11#11
Good luck and post back on how you're getting on.
