The problem is, you need to eventually play back the content. Therefore, there has to be a way for a device, which *doesn't know* the key used to encrypt the movie, to figure out that key. So, along with the movie, an encrypted copy of the movie encryption key (the 'title key') is also stored.
Now, the encrypted copy of the title key isn't any good unless you can decrypt it somehow, so all players that are created are granted a 'player key' that can decrypt the title key. The title key is, in fact, encrypted many many times on each disk, once for each possible player key. If a player key is deemed broken, future disks simply stop containing a copy of the title key encrypted by it, and thus the player stops playing newer movies.
This is, btw, the EXACT same system used for plain old DVD's. The encryption method used on DVD's turned out to be terribly weak, so HD-DVD used AES instead, but how the encryption was used didn't change, so is vulnerable to all the same problems as the DVD encryption was.
Thus, a repeat of the DVD format being broken with the Xing player key is happening on HD-DVD with the Power DVD HD player key.
If we are lucky, someone might start taking all the decrypted title keys that will be out there, and start brute forcing player keys off disks. It'll take a while, as AES-128 isn't easy, but it is possible if you know the title key. A 'client' that sits around and chews on a key set until it has the player key are easily created, and you could farm those out to a trojaned PC if you had the time/money.
DRM schemes don't work because at some point the encrypted content has to make sense to the people watching/listening to it, so it has to become the actual content before this happens. As long as this is the case, all protection schemes are doomed.
