I believe that MS are using this as one of the big points for HD-DVD vs Sonys Blu Ray.
You will aperently be able to do a 1:1 quality rip, my guess is it somehow puts a marker on the disc that this has been done so that the discs cant be put on several machines at once.
MS vision is to continue the MCE expansion and allow extenders like a 360 to even playack these HD DVDs added to MCE. Of course Vista and the whole HDCP requirements should come into play.
I can see someone asking the obvious in how this effects extenders and a device like X360 with component output if streaming HD material is possible doesnt this make it easily copied coming off the X360 which has no HDCP support?
Like so many other questions it hasnt been cleared but X360 according to a recent developer interview could with the appropiate PC allow upto 5x HD Playback extenders at once with the same file or different files all played independently. Maybe it gets downscaled when sent through MCE extenders, does raise an eyebrow though. Possibly only stabbing in the dark here that within the video is further security that would trigger protection on a Hidef DVD recording device.
Tell ya its like an episode of LOST for every question answered you get 2 more questions.
For me i see HD-DVD great for PCs but think BLU-RAY as a consumer device may be better and be better supported, who knows.