Q: Does anyone know why when streaming a movie from my iMac the screen on my tele goes grey but I still get audio. It only happens when using the DVD application on the mac. iPhoto streams fine.

You are prevented from Airplay mirroring certain things like DVD content as the material is usually protected so you get a checkerboard type display.  I think there is a theoretical risk that the Airplay stream could be intercepted and the protected video copied, albeitin lower quality.

Apple may be being cautious or are required to do so with the DVD player app by movie studios/licensing authorities.  It makes no sense to the average consumer who is just trying to send their purchased DVD to the TV via the computer and AppleTV.

Playback in something like VLC should work - not tried it myself but others have commented it doesn't have the restriction.