Apparently when PC DVD drives first came out in 1998, the drives did not have support for region codes and needed the operating system to enforce region coding. The idea at the time was that by January 1, 2000 all new drives would support region coding in hardware rather than relying on software enforcement.
As it was, the software enforcement of regional codes was a pain in the butt. The code was complex and not exactly reliable. The Vista team said that only people who have an old drive will notice any difference and since the average life of a player is three years, it is unlikely that there are any about to cause trouble. According to a Volish developer's blog, most of the pre-2000 DVD players that Microsoft could find were either dying or already dead. More to see here. µ