That was the unfortunate side of licensing fees. The Wii has all the hardware to play DVD, there is homebrew of it, but if you want to do it the legal way Nintendo would have to pay.

Also I don't think Nintendo wanted to turn the Wii into a cheap commodity DVD player, they make most of their money on the games. It is a shame because the Wii was one of the most TV friendly interfaces and inputs, at least when the Wiimote wasn't being throw at the screen.