well for the DVD drive and decoder card, as long as you're DVD drive is as fast as YOU like, and you're CPU is powerful enough to do software decoding, then yea go for software decoding. I learned that the 3dfx card has some sort of limited acceleration (helps maybe 1 or 2% at the best), but if you want software decoding, don't go 3dfx. why? for some reason, the Voodoo 3 has some odd invisible lines (very hard to describe).
For software decoding, I recommend a system of these specs or higher.
-K6-2 400 CPU power or higher
-64 megs RAM - it helps a fair amount
-good soundcard, either the SBLive or an Aureal Vortex 2 card. I upgraded from an old crappy SB16 emulation card, and this fixed all my DVD playback stuttering problems
-Matrox G400, any ATi card, or any nVidia card with TNT2 power or greater
-good DVDROM, ie one that people have found to be good, speed is the only issue (like for installing games etc). doesn't effect playback, like a 50X CDROM doesn't effect playback of audio CD's.
Those are the vital components of a software DVD setup.
for a hardware setup, you barely need anything. check the specs on any hardware decoder card page..