I eventually broke down and got a real DVD player even though I already had this.The X-Box would not play my Lord of the Rings: The Two Towers Extended Edition DVD. It would play on my computer and it plays on my new DVD player but it would not play on my X-Box. I've also had some problems with DVD's skipping/stuttering that I haven't had on my new dedicated DVD player.
I think it's just that the DVD drive the X-Box uses is cheap, so you might run into some problems.
If you really want to watch a lot of movies, I suggest getting a seperate player that was built with DVD viewing in mind. However, the X-Box will play 99% of DVD's just fine, so for this price you wouldn't be amiss to have this for a multi-TV family where the parents want to watch Gone With the Wind and the kids would rather watch pretty much anything on the other TV.
If you're just hoping this will save you some cash, don't say I didn't warn you! Now and then you might find you rented a movie that your X-Box has problems with but a real DVD player wouldn't.