There was a DVD software called Software Cinemaster 99 that was excellent on these old 9x machines. Various companies rebranded it to include with their cards. It's hard to find though. I think it gives better quality and performance results than the popular PowerDVD or WinDVD recommendation.
Also, KLite Codec Pack 3.45 works on Windows 98 and includes the PowerDVD MPEG2 decoder. This requires DXVA support for acceleration. Older chips do not necessarily support DXVA for their MPEG2 acceleration interface.
That voodoo 3 can do hardware DVD, MPEG-1 andMPEG-2, playback if i recall.
No it only supports some basic video features. Colorspace conversion and scaling.
The best old MPEG2 cards are ATI Rage 128 or later. SiS 6326. GeForce 4 and later. Maybe others I can't think of offhand. These process iDCT and motion compensation, reducing CPU usage dramatically.