Thank you very much for taking the time to reply. Most of what you say makes the trouble I am having make sense. But three things do not seem to fit:
I never said I know everything, or in other words I can as well be incorrect:-) No warranties implied.
1) I can play the .iso that I made with dd just fine in Xine. This should be just as scrambled as the DVD I burn from it.
As far as I understand there're two ways to get scrambling key: a) convince player to give it up; b) brute-force it [which takes like milliseconds]. Xine is using libdvdcss and it's known fact that the latter is perfectly capable of b). If scrambled sectors are marked as such [I believe they are], then they can be identified and key can be brute-forced upon moment first scrambled sector is encountered. It's plausible that that's how .iso playback works. But once again, no warranties implied, as I don't actually consider myself an expert in CSS protection...
2) This procedure has worked to create a copy of a commercial single layer DVD just fine.
It's possible that that video content on that particular DVD was not actually scrambled. It's not required by standard... You can even have region-protected media, yet unscrambled content...
3) running diff on the .iso and the (unplayable) mounted burnt DL DVD reported no differences.
Keep in mind that scrambling keys reside in DVD control area. You can't copy them with dd, nor can you burn them on copy, so that original and copy *are* different. A.