WMC suffers from a myriad of problems. MS decided to make it available to OEMs who make computers, so what did we get at first? Media Center PCs the shape, size, and weight of a regular PC, just with an IR port on the front that you're supposed to stick next to your TV. More "set top" like cases, which are appropriate for an OS used to control TV programming, were pretty much piano black desktop PC cases which are just barely above "hobbyist" by simply having a brand label attached.
And don't bother trying to DVR anything that you'd actually want to watch. Despite all of the apologists for PC-made-into-DVR concepts, there is nothing on OTA that I want to record, and the unencrypted side of my FIOS TV is community affairs only. I need a set top box from Verizon for that ... unless I want to do stupid, super-hack, jury rigged crap like taping a remote control to the ceiling and pointing it at the PC next to the TV. Really, what's the point of the beautiful on screen TV Guide and timed DVR capability when it's all rendered useless since the only channel that works on that guide is "Video In" since I need a box from Verizon to get anything actually interesting.
"Get a cable card," you say. Sure. Many cablecard compatible tuner cards available? When did the 1 or 2 available come out? Last year? And now I'm hearing stir that "CableCard is dead!"
What Microsoft should have done with WMC was partnered with Scientific Atlanta and Motorola and gotten WMC on every Comcast, Time Warner, and Verizon set top box in America ('cause whatever they use now sucks). Not give it to freaking HP, Dell, and Acer.
As for DVDs - I use a DVD player. But seriously, people watch DVDs on airplanes, in waiting rooms, and even at their desk at work on their notebook. That's a big reason people buy Windows 7 notebooks and Mac Airs. While one can use VLC or whatever (which I do on my Asus netbook), there still will be a ton of people who just buy a freakin' Mac book next time they're in the market if a Windows notebook can't play a DVD or BlueRay out of the box.
And yes -- OEMs have bundled the DVD and/or BlueRay codecs before -- most of the time they're trials and the OEMs, as I recall, never had anything noticable on their website that said "Video playback extra" near the price next to computer described as having a DVD player - in other words, the OEMs will screw people again.