In order to have DVD playback, I think MS would have to play a royalty fee for every copy of Windows Media Player. That's why you can't do it as default, since WMP is free to download.
The same reason is why the xbox won't play DVD's unless you buy the remote control kit. Rather than pass the cost of the license to play DVD movies onto everyone, they gave customers the option of buying the DVD kit and priced the console cheaper (rather: didn't lose an extra bit of money on it).
I'm not sure how VLC gets around the royalty thing - I'm just glad it plays DVDs since I reccomend it to all my friends who ask me what software to use on their PCs.