Yes, this is unfortunately by design.
MadVR has a problem with the Win7 DVD Navigator filter (qDVD.dll) because of a so called 'Macrovision error'. The DVD Navigator filter sends out an extra 'pin' to the video renderer which works ok with EVR, but not MadVR. There are lots of threads on 'MadVR Macrovision error' if you want to google it.
There are some possible workarounds eg. Replacing the Win7 qDVD.dll with the XP qDVD.dll one, but since this would require replacing system files I think JRiver have decided to just use EVR for VideoTS. Adding ffdshow in the path may also help. Lots have managed it with MPC-HC, but I think MC is 'hard wired' to reject MadVR for DVDs. I've played with the custom RO function to try and force it, but failed miserably.
There's some active work on LAV filters to support DVD decoding (MC doesn't use LAV either for Video TS at the moment), but this wouldn't necessarily solve the macrovision problem.
With MadVR's new upscaling algorithms I would love for this to work in MC for DVDs.
SBR