Im guessing the C3 isnt fast enough to do DVD decoding purely in software but it should work with hardware assisted MPEG decoding. That requires a videocard (or dedicated mpeg2 card) that does just that (about any post Geforce card I think), and a software player to take advantage of that.
What videocard do you have ? Try changing the settings in PowerDVD to enable hardware assisted mpeg2, see if that helps, or another DVD player (one that came with the system ?)
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