I'd say a PIII or any processor higher than 433 MHZ could process DVD's just fine.. in fact your 266MHZ idea probably would have been fine to process just dvd's... of course you want to throw navigation in there.. so your going to need a bit more power.. hence the recomendation for anything higher than a 433... if you know what nav. software your using then check the specs out for that and see what it requires..
personally a PIII 733MHZ with 256 MB would handle anything you'd throw at it and maybe then some.. hope this helps sorry my ideas are kind scattered.. but i'm at work and no time to organize ideas !!!