After installing Windows 7 SP1 and attempting to play a DVD in Windows Media Center, I received an error that the disc was not formatted for my current region. This obviously wasn’t true, since I was playing a Region 1 disc (United States) and before my upgrade, all discs played fine. So, here’s how I fixed it:
- Close Windows Media Center
- Attempt to play the disc with another DVD playback app, such as Cyberlink PowerDVD
- Close the other playback app, which should play the disc successfully.
- Relaunch Windows Media Center.
- Done!
Please let me know if this works for you 
Best,
-Auri
Auri's Blog 