Who said the DVD stream would need to be the full 720 x 480 when it goes over (that's what optimization tricks are for)? Reincorporating it into something that could arguably be called a re-broadcast would certainly cross some lines. Unless you're still running a G5, I don't think on-the-fly compression is going to break the CPU bank here, considering its a rather mainstream feature of iChat/Quicklook.Even a DVD is already compressed, but its bit rate is quite high. Now, you want your computer to compress its own image on the fly which needs a lot more resolution than 720 by 480 and send it over. Give it up.Well, OK, give it up for the next few years.
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(Look at the forth screenshot...)
http://www.apple.com/macosx/features/ichat.html
If you've ever tried to screencap from Apple's DVD player instead of VLC player, you'll recognize that Apple doesn't seem to have any interest in having users do anything with the DVD playback other than view it.Put on a photo slideshow, click through a Keynote presentation, or play a movie in full screen, accompanied by a video feed of you hosting while your buddy looks on. In fact, you can show any file on your system that works with Quick Look.
~ CB