Any game that works on xp will work on win 7, as win 7 can run bot 32 and 64 bit programs. Some games might have to run with compatibility mode, but I have yet to find any. You cane even run dos based games using a program called Dos Box.
As for a DVD player, the answer is yes. I personally don't use windows media player, but instead use VLC media player. I have found that VLC will play virtually any kind of file, and has pretty good features for a free player. Hope this helps.
-Greg