I'm not sure if this happens in XP, but it does in Vista.
If you play a DVD that contains CSS protection (pretty much all of them) in MPlayer Portable, a folder is created called .dvdcss inside the UserName folder.
[subject fixed by mod JTH. "MPlayer is not 100% portable" was not descriptive]
There is an environment variable in mplayer that you can set in the launcher (John will need to set in the launcher though) but it will fix that there MPLAYER_HOME, this is well documented in the mplayer documentation actually found in the mplayer directory under the file MPlayerPortable/App/mplayer/man_page.html scroll down to the link ENVIRONMENT VARIABLES
your friendly neighbourhood moderator Zach Thibeau
Just to confirm, yes it also happens in XP.
%userprofile%\.dvdcss
It would be good to have it fixed at some point if possible.
VLC Media Player Portable also does the same. Posting now...