The card is capable but not all 8600 cards are HDCP compliant. Your monitor also needs to be HDCP compliant (unless you use the right software tools...).
AnyDVD should remove any HDCP issues.
PowerDVD Ultra should play the DVD's just fine.
The LG blu-ray/HD-DVD combo drive will play all three types of DVD's.
Edit: the LG drive comes with a version of PowerDVD that will work fine, but it is slightly crippled because it does not output full 5.1 audio. I may be wrong on this, but i do know that it is slightly crippled in the audio output. But, it will play the DVD's and save you $100.
(If you're adding up cost, that's about $430 so far.)
Vista...not sure. That's how I play my HD stuff, but I don't remember if it's required or not.