you can't do dvd on the fly, it needs to be decrypted and shrunk.
the nearest you could get is anydvd which does on-the-fly decryption (but not realtime) but often you'd need to shrink the decrypted vobs etc.
rippers on linux include vobcopy and perl-video-dvdrip, personally i use anydvd and nero recode under vmware, you can also use dvd decrypter or dvd shrink under wine.
yes, nerolinux is quite nice, i prefer it to k3b, probably because i'm so used to nero. i hate xcdroast.
oh, as far as hardware goes, my benq dw1640 works nicely under fc4, the only problem is the lack of linux firmware flashers - and it's quite hard to find .cvt files which you can flash using the dangerous bros' dos flasher and a windows boot cd.
there's a linux firmware flasher available for nec drives (i've used it on my nec nd1100a and 3500a) so the nec nd3540 might be an option. http://binflash.cdfreaks.com/
i'd stay away from sony.