Reg key worked perfectly for DVD's for me. Also added below to AutoPlay Blu-Rays in WMC7 (w/PDVD9 installed).
[HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\explorer\AutoplayHandlers\EventHandlers \PlayBluRayOnArrival]
"EHomeDVDDropTarget"=""
The drop down for Blu-Ray in AutoPlay shows Play DVD movie using Windows Media Center, instead of Blu-Ray, but it does open PDVD inside Media Center like it's supposed to. It works for Blu-Rays, but don't know how reliable it will be though.