You'll only need one if you want to play the Microsoft format disks. Everybody will have bought a new player within 5 or 6 years anyway.

As for "Video Out", you embed the final descrambler in the display. Unprotected content will play fine, but protected content will require a "Microsoft Enhanced Display".

Will the descrambler be reverse engineered? Of course it will. So the devices will be rigged to detect if the content was once protected, and if it isn't protected now, don't play.

Any scheme can be beat, but if you can restrict that to "a small circle of friends", you're most of the way to winning.