Have you remembered to install the hardware decoder supplied on the CD with the 9700?
From my findings over the last month and talking to users, certain people are having lock out problems with MMC 7.8 playing certain DVDS, such as lord of the rings, this is actually documented on ATIS website and they are looking into the matter for a future bug fix. I recently received MMC 8 which is supplied with the AIW 9700 and apparently has some bug fixes.
As you dont state which software you are using ill guess and say it is ATIs own software.
Have you tried powerdvd? same problems? if you post more details we can help you more.
IF you are playing DVD rips such as DIVX or supervcds you have to have the correct codec installed or the screen will be black with sound. sites such as
www.divx.com and the recent releases of the NIMO codec package will resolve most issues regarding the latter.