Quote I notice that PowerDVD17 has designated its folder as an exclusion from Windows Defender Antivirus. If I understand correctly, this means that if malware gets placed into the PowerDVD17 folder, Windows Defender will never find it, much less get rid of it.

Is this danger really necessary?

Although I don't use Windows defender, powerdvd does not add itself as an exception in my antivirus software (Norton).
I think a software player is not so powerful that able to add itself as an exception on other antivirus software exclusion list automatically.
Have you ever added it in exclusion previously while launching powerdvd process, then you just forget it?

If it is a firewall exclusion but not virus exclusion, the firewall software will ask for your consent while the program connected to the Internet or network at first time.

However, powerdvd does not have any virus/malware detected by my antivirus software so far.
Try to remove it from your exclusion list, and then check if the playback features work.