Hi colspeed,
That's amazing detective work! I didn't even know VLC had a library feature, so I probably would have failed to help you much. I'm so glad you found the solution, and a big thanks for sharing it back with all of us!!!
I'm not sure I would recommend Power DVD, even though that's what I use a lot. It's a fine solution, especially older versions (I think I'm running 22), as they started nixing UHD 4K Blu-ray support in more recent versions. Back when I started programming CMC, I was a dedicated PowerDVD user, so that was the only player supported, and you can see there's some extra config options related to it. But due to great demand, I've expanded player support to so many options, about 9 players I believe.
Part of the reason CMC can be configured to call different players in different scenarios is that they each have their strengths and weaknesses. There is no one right answer (in my opinion).
I love MPC-BE, for so many reasons. It has great integration via the command line API, so CMC can communicate with it and even get playback position data from it. It can play most anything you throw at it, it supports video quality enhancement filters/plug-ins, and it auto-closes on playback finish, effortlessly returning control to CMC (this is awesome for TV Episodes, auto-playing episode after episode for the Netflix experience). It's so close to being a perfect player, amazing for a free program, but it has one major shortcoming: it can't handle Blu-ray menus.
PowerDVD is almost the exact opposite. It's command line is highly limited, so it's almost worthless for some TV Series episode playback (it can play re-encoded episode files, but not direct play episodes on ISO/DVD folder). It doesn't track position, it doesn't auto-close. It has annoying adverts pestering you to upgrade to the latest version, even when you bought the then current version mere weeks ago at the end-of-year sale. It doesn't support filters/plug-ins, so while it has good picture quality, it's incapable of reaching peak quality levels of other players. But it does have menu support, even on 4K UHD discs. That's the main reason I keep it in my roster.
VLC is a great player, with many of the features of MPC-BE, but head to head I pick MPC-BE over VLC.
Many here (and I encourage them to chime in) love JRiver Player. JRiver is a full-blown media center, but one of the components is a video player that we can call directly, and it is like the lovechild of PowerDVD and MPC. It can do menus, but it can also do filters/plugins. Its command line is worlds better than PowerDVD, and more content can be directly played via it, but it lacks some of the best command line features of MPC. If you're looking for a single player that checks the most boxes, that might be it, and it's probably a better choice than PowerDVD.
One caveat about JRiver - I've not had success with it. I've only tried the free-trial version, and perhaps that is the problem, but I've always failed on playback from CMC. I can't imagine I'm doing anything wrong, after all, CMC works for all the JRiver users here, everyone except me. I keep telling myself that someday I'll buy a license and try again, maybe that will fix the issue. I have played content from JRiver directly, it obviously works on my install, but there's an unknown issue blocking integration with CMC on my setup, which is super ironic.
Also, if you give JRiver a try, remember that since it is a full-blown media center, you need to be very careful on the install. It basically wants to take over your entire system. You need to disable a ton of options and associations during the install, to keep it as barebones as possible, since you only want the player and not all the other baggage. You may have to cancel/abort the scans for media as well, I think it wants to ingest all your media.
There are other players that are supported as well. PotPlayer, Win10 Movies & TV, DVDFab, even the classic ArcSoft TMT 6, though integration is probably a little rough on that one. My advice, install all the free ones, try them out, and use them where they work best for you. Then for the paid options, get a free trial and test them out as well. You may like some of the paid options enough to buy them.
In CMC, you can assign different players for different roles, like this:

- image.png (156.97 KiB) Viewed 2880 times
So you can choose the best player experience for DVD's vs. Blu-rays vs. 4K, and also use a different player for episodes (MPC is usually great, or VLC). You can also use a different player for separately encoded media files. Perhaps you find a single player that suits all your needs, or perhaps you use 6 different players. Don't take my screenshot as guidance, though - I do a ton of testing and that screenshot is test data, not my actual recommendations.
However it goes for you, I encourage you to share your experiences with us. Good luck!
Paul