Yes, I had that error too.

So I set up the dvd goup as described above, changed permissions as described above (I changed permissions on everything that may have something to do with the dvd - see below*)

Yes ! Open up Xine as root user and take a note of the settings - especially in the "input" tab.
Now log on as a normal user, open up xine and change the settings so that they are like the ones you had as root user.

Worked for me.

* There were also some files in /dev that pointed to other files. I changed permissions on these 'other' files also. How did I know which files to look at? I opened the settings window in xine. It mentiones files and paths to those files. I looked at them all through Nautilus (or other GUI file browser) and then edited permissions to those files and any 'other' files that they point to.

Wow, thx for the solution. I thought I was going crazy trying to figure that out. I even went so far as to reload linux.

Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you Thank you