All my video settings are default.
There is no default. That's why mojave is asking whether it's set to "automatic" or something else. With it set to "automatic," playback is handled by
JRiver video engine (using DirectShow filters). Note you are getting a DirectShow error. I won't pretend to understand much of this, but my experience suggests the only video decoder that works for DVD video in Windows 7 64 bit is
Microsoft DTV-DVD. So maybe your
video decoder setting is not set to "automatic," or it needs to be set explicitly to this filter to ensure it's selected.
Whatever the problem, it's helpful to bear in mind it's not MC playing the file when DirectShow is being used. VLC is different—it uses it's own internal filters. So whether or not it can play a file is not relevant to the question of how to configure your system to do so using DirectShow.
You may find it helpful to use a tool like
GraphStudio to illustrate exactly how the DirectShow graph is built for a particular file. The attached screen shot is what this shows for a DVD file on my system. Seeing this and knowing it works makes it less daunting to configure MC in a way that ensures the same graph is built.
Having said that, I still have one annoying issue with DVD file playback. In GraphStudio's viewer, they open in about 2 seconds. In VLC, about 7. In MC, they take about 15 seconds to open, and then another 15 seconds to find a bookmark. I don't think it's always been that way, but I don't play this often enough to have any sense of what might have changed, or when.