Yes, it is about flexibility and changing the theme is that manner was not flexibility, it was stupid. Giving people the option of having a theme like that is flexibility (which, by the way, already existed in prior Ubuntu versions), but making it the default was an unnecessary nuisance to the vast majority of Ubuntu users, especially new users who already aren't as familiar with Linux.

Ok, so, question for the guys that have been using many different distros over the years....
What is a good alternative to Ubuntu, that has a live cd distribution that i can download and try right away?
I'm looking for:
Low system requirements (i would be trying this on a 1.4 Ghz, 512mb ram machine).
Easy to use (meaning i don't ever want to hear "open the terminal and...").
Good hardware support.
KDE 3.x would be great too, i freaking detest KDE 4, it made me migrate to Gnome.
Also would be great, but not necessary, out-of-the box support for MP3s, DVDs, etc.

For most day-to-day uses, maybe, but there's no way you're never going to hear that for solving some problem.

I think you should try linux mint. It's great, has a lot of non open source stuff installed, like video codecs and such. And there is even a KDE version IIRC.

I was also going to suggest Mint, in fact (it's available right here, for reference). It reportedly runs on 800Mhz, 256MB systems, so it should be fine on yours. It uses Gnome by default but there is also a KDE version (which I think may still be KDE3, although that may have changed since then).
As for diving into the Terminal for some functionality, unfortunately that's a given with Linux, no matter what the distribution, because various things inexplicably lack a GUI equivalent. Exactly how much terminal use you need will depend on how much GUI functionality a particular distro provides, and from what I've seen Mint provides quite a lot of it.

Especially for playing DVDs. I don't think I've seen a distro yet where there's a simple installer for the deCSS code.
Actually, if you want a super user friendly Unix, with no need to run terminal, (plus many other benefits), you're actually looking for Mac OS X.

Not to keep coming back to Ubuntu, but it and all its variants have access to the deCSS library package through the Medibuntu repository and the package manager, just like most other software on Ubuntu. Its not installed by default because of legality issues (its considered a violation of the DMCA in the US), but it is readily and easily available to everyone. Everything else required for DVD playback is already installed by default.

Since Ubuntu and the like have financial backers, why don't they just license the technology like Microsoft and Apple do?

That would require including closed source technology in with the OS, which goes against their philosophy of only including open source (free) software by default. Dell does it with the Ubuntu machines they sell, but they use some kind of added proprietary software to do it. Mark Shuttleworth ("The Man" at Canonical) explained it briefly on his blog a while back:
http://www.markshuttleworth.com/archives/133

What if the needs of the users do not include DVD viewing? Why pay the license fees for a headless web server or build machine? It's easy enough to add/enable another repository and install the non-free stuff. Even for non-free hardware drivers, just click on the menu item and agree to install some non-open drivers.

You seem to forget, Windows does not include DVD playback support at all. You also need something like PowerDVD in order for your DVD drive to work. When you buy a Windows machine from an OEM like Dell, they will include something like PowerDVD in order for you to play your DVDs, but if you just buy Windows itself, you are stuck with an OS that lacks the ability to play DVDs. The scenario with Ubuntu is no different.
If you want to blame someone for the state of DVD support in Linux, blame the guys who make software like PowerDVD and the drive manufacturers. How come they don't make a Linux version of their software and include it on the resource disk that comes with the drive? Because Linux doesn't matter to them, even though it does matter to their customers. Well, at least it matters to some of their customers.

Actually there is a version of powerdvd for linux. Dunno if it works well though. Link
For me it's just a lame attempt to get more cash, as they could sell both linux and win versions on the same disc.

Exactly. Not only do they have the ability to provide a Linux version on a DVD drive install disk, but don't (not sure if PowerDVD or the drive manufacturers are to blame for that), they also make you pay twice for software you already own. Either way, it is not Ubuntu's fault they don't include DVD support, nor should they really be expected to.
EDIT - Interesting to note, that Canonical store page for PowerDVD only lists it as compatible with up to Ubuntu 9.04. I wonder what's wrong with 9.10 or 10.04?

Funny, Microsoft's own media player seem to work well for me. This is a retail Win7 Ultimate, on a build-my-own PC, and I sure don't have any extra DVD player software installed. I'm pretty sure it worked equally well on Vista, though I cannot say for sure as I cannot test it at the moment and have used 7 since fall. XP was cumbersome though, needing an extra codec installed.