I was having this error for a long time, trying to figure out.
In my search, I had found:
It seems to be an issue with SP3.
someone mentioned they could go in and play the .vob file but that was it..
uninstalling and reinstalling does not work
changing hardware acceleration does not work.
I long since gave up on the search, even later changed my hard drive (yes even on new HD it was giving this error), but my windows media player kept giving me a copyright protection code error, and one of the fixes was to reinstall my video driver. Or install a decoder (seems to mean the only way windows media will play movies is if you have other dvd software installed - this way it can read from it).
*upgraded my video driver. I have a HP Nc6000 ATI mobility radeon 32mb card.
*also had bought a dvdrw drive so I put that one in
*was told by windows media I had to change my region the dvd player itself was set on region 2
Retried windows media - still again got the copyright code error, decided wth Ill try loading powerdvd again AND IT STARTED
So I dont know which one of the 3 above resolved the issue for PowerDVD, and hopefully it wont come back.
Still working on windows media LOL but I know so many had issues with PowerDVD I wanted to suggest these potential fixes.