I have just posted a "proof of concept" demonstration of CD-i Emulator MPEG decoding on YouTube:
The Philips Media bumper animation is MPEG (audio and video) and so is the audio for the piano sequence. The in-game crash is due to an MPEG sound effect.
This is with a Gate Array MPEG AH01 cartridge (22ER9141 F1 AH01); as the cartridge types get newer the decoding starts working lesser and lesser. Later GMPEG cartridges will crash earlier in the gameplay, VMPEG and IMPEG will not play MPEG at all. This is simply because I haven't gotten around to fixing those things yet; there are still major bugs in the buffering of the MPEG data and while that remains unfixed there is no point.
The magenta border indicates "beta" quality; it is not that hard to display the proper color (black in this case), but this will remind everyone that it is a work in progress.
Many other DVC titles will play their Philips bumper but crash soon thereafter; some others won't even get that far. In some cases this is not even due to MPEG decoding issues but to various "other" reasons for crashing (The 7th Guest is a notorious example).
I have also put up a new draft of the upcoming version 0.5.3-beta1 Release Notes on the website.