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Interestingly on a fresh install of vista (no updates applied) I dont have a problem. I dont know if this is a bug, whether an update is borking something, or whether it's DRM related.
If I copy the movies back to the internal drive, they play fine.
Anyway the solution is to make a hard link to the external drive eg
>cmd<
mklink /J mymovies E:/movies
Where E:/movies is the external drive and directory I have the movies stored on, and mymovies is the local folder I want the drive linked to.
Now when I point mediaportal to the linked directory all movies play fine, and WMP plays without the strange 'region error'.
Hope this saves someone with the same problem a few hours of hair-pulling.
