You need a hardware DVD decoder card for the real-time preview - a software DVD player won't work.
As far as I know, you need either a Cinemaster or RealMagic Hollywood+ (a Creative Labs Dxr3 card should work because it's basically a re-badged Hollywood+).
I actually had a spare Hollywood+ card lying around and tried it, but I kept getting error messages from within DVD Maestro - I don't think it likes the latest (v2.3) drivers.