I don't think it was a case of being able to multitask, just a case being able to watch a DVD at all. These required loopback cables since they superimposed the image over the VGA signal (or vice-versa) which means you didn't resize (just fullscreen or not), so unless you had a huge screen and played the DVD windowed, there is no other space to have an excel spreadsheet open, or most other programs for that matter, without covering the video. 1280x1024 was BIG back then, with 800x600/1024x768 being the norm. DVD playback size is 720x576 so doesn't leave much room for anything else.
I had one of the creative encore DVD or something (DVD drive and decoder card) because it was cheaper than a DVD player and my PC at the time could not keep up with playback. In fact I seem to remember all P2's failing to give smooth playback, it took a P3/800 and InterVideo WinDVD for me to lose the DVD card (although P3/500 could possibly do it? idk, I went K6/233 -> P3/800 o.0). 5.1 Audio was all the rage too when DVD's came out and most DVD's had this by default for playback (some not even having 2 channel stereo). My card could decode the 5.1 into Stereo signal for my 2x PC speakers, then 5.1 got popular and you didn't need a massive expensive 5.1 amp, and could get 'PC' subs and 5 satellites cheap enough.
All in all these cards filled the gap that general purpose hardware couldn't (very short time period, maybe 2 years? if that?). gfx cards started to do MPEG decoding as standard, follwed by software being capable enough (PowerDVD/WinDVD).