on-the-fly means a direct copy from one optical drive to another without first creating an image or copying the files to your hard disk. This method is not really recommended because usually, because of the high data transfer rates, your source reader will not be fast enough to keep up with your writer.
Anyway, what I can suggest, although I don't know this will help for sure, is to install AnyDVD. This little application, after you reboot, will be running in the background and it will decrypt any DVD-Video disc you insert in your drives automatically. It could very well be that the movie you're trying to copy uses some kind of additional copy-protection but AnyDVD can handle those. AnyDVD is not freeware but you can download a trial version first to see if it works.
So, install AnyDVD and try to copy your DVD disc as you usually would. Let us know if it works!