Hi dcunneen,
My Hercules Prophet DDR DVI video card (GeForce 256 DDR) also came with PowerDVD 2.5. I had no problems playing DVDs on my PC and the colours were splendid, especially after I did just a minor amount of playing with the video card settings - the overlay tweaks etc. Playing DVDs was great - no separate hardware decoder used. (Caveat: one DVD movie did have a minor amount of jerkiness on one particular scene)
But that's my experience, as it would appear that others may have had problems as well when you consider KaiN64's observation.
Anyhow, I've just replaced my video card with Leadtek's GeForce II Ultra - I've yet to try playing DVDs on this card (using, this time, PowerDVD 3.0) and hopefully that will be ok.
Regards,
Asterus