At the time PS2/Xbox first came out, DVD players were still generally over $200 on their own (as opposed to the $40 I saw a progressive scan one for the other day). I've known lots of people who used their PS2 as their first DVD player, because it let you do it out of the box. Granted, you had to use the controller as the remote unless you ponied up an extra little bit, but it was a perfectly serviceable solution.
Microsoft might have had something to pay extra for if they had allowed progressive scan (which the newest retail xbox might allow, but afaik, still doesn't) for dvd playback, but given all the talk about how they're eating it on hardware sales, one could make the argument for them breaking it out initially.
It's quite a bit less valuable as a feature now. And remember, it did make for using commodity off-the-shelf hardware for the machine.
Less of an issue now. I would have a dvd player in the bathroom if there was a tv there...
How many times have you exploited the more "portable" gamecube elsewhere? 
I don't remember if you played the Simpsons Hit & Run on the gamecube (which I purchased metroid prime 2 for yesterday), but I'll bring it in for you to give a whirl on the xbox.
My inner ear is all screwed up after playing Half-Life2 and running around in the first vehicle. I've had to stop for the night. Beautiful stuff, ok pacing, certainly has a sense of tension in a much more expansive world than Doom3, though it does seem to tend to rush you through the world. And the loading times are somewhat distressing, even on my tricked out rig. 
Looking forward to a little gravity gun action...
Kris
