CD-i Emulator 0.5.3-beta4 (and previous 0.53 betas but with lower compatibility) support proof-of-concept MPEG playing for Gate Array MPEG cartridges but not for the other types. It does however support the 1MB memory extension feature of all models. With the CD-i Emulator comes a dummy ROM file so that you can use the extra memory even if you don't actually have a DV cartridge ROM. Some titles can use this even without the MPEG playing function (e.g. The Apprentice).
So the newest CD-i Emulator can play Digital Video on CD-i titles? yes, and it works surprisingly well. The most easy way is to test games that just benefit from the extra memory and not per se by showing MPEG video, like with The Apprentice. But you need the rom file for the gate array MPEG cartridge to play other games like Dragon's Lair and even Atlantis! Interactive Dreams is learning more about the possibilities of DVC emulation thanks to cdifan, so expect more tutorials in the coming period.
We expect to see more of any updates on CD-i Emulator 0.6, the first public release including DVC support. You can download the current 0.53 beta 4 of his website and you can find the DVC ROM on the internet (Let me know if you have any trouble and I'll guide you through the process)
cdifan about the CD-i digital video cartridge ROMs: "CD-i digital video cartridge ROM types are easy to detect by the presence of driver modules for the various chipsets. Most cartridge types can be used in any CD-i player model with the correct number of interface connector pins (either 100 or 120). The names of the ROM types are chosen to match the cartridge type and phase number and sometimes the ROM revision number but are otherwise fairly arbitrary. ROM type xmpegyab.rom indicates a Philips XMPEG digital video cartridge with AH number 0y and ROM revision a.b; either y or ab is sometimes omitted. The abbreviation GA is used for Gate Array.
All of the non-Philips players so far appear to use Philips digital video hardware, but integrated into the player instead of in a separated cartridge. The CD-i Link program cdilink will use the cartridge ROM type to name the digital video cartridge ROM images uploaded from a CD-i player."
[Thanks, cdifan]