All that is true at the moment... on discrete devices. No discs yet implement the flag that says "downrez if HDCP isn't present."
However, all the SOFTWARE players on Windows so far DO THIS ANYWAY if you do not have a complete HDCP path to the monitor. And, as far as I remember, the GeForce 8800 is the only card out at the moment that is fully HDCP-compliant, so unless you have a GF8800 and a monitor that supports HDCP over DVI (like the Dell 2007 or 2407, and many other recent models I'm sure), you're screwed.