For unsupported, third-party DVD±RW drives, you can download/run
PatchBurn, to create a support profile for it, enabling native compatibility with Apple's iApps and DVD Player programs. The error may be triggered because the DVD Player program wasn't designed to support USB-connected DVD drives. Additionally, if connected to a USB 1.1 bus, you'll probably experience performance issues (unrelated to drive support). A USB 2.0 PCI card (OS 10.2.8 or newer) would be better, although a FireWire-connected external drive would be preferable. A year ago, I bought a Memorex 16x FireWire/USB external DVD±RW drive (they dropped the FireWire interface with the 18x drives). When I get a chance, I'll connect it and try watching a DVD movie with it, and then post back with the results.