Sorry, but how did you come to the conclusion that one can not watch iso files?
Because of comments from users/admin at Slysoft, users on AVSForums and my own personally experience. (Mod's Please forgive me for this link but I believe it is a very important issue for HTPC'er
Version 7.3.3319a allowed playing of ISO for all BluRay and HD DVD.
Version 7.3.3319f will not allow the playing of ISO which have BD+
Version 7.3.3516 will not allow the playing of ISO's at all.
Some people have been trying to work around this by copying different parts to 3516 such as described above.
Have fun with the latest build of PDVDU. Sooner or later we will have to upgrade to the lastest version for Profile 1.1 or 2.0 or a key change.