While Microsoft will never include built-in ripping software, Windows Media Center in Windows 7 does support ripped DVDs. They now appear in the "Movies" section of Windows Media Center, and you can use your original VIDEO_TS folder or convert your DVD to MPEG-4 (or WMV, etc). If you want album artwork, all you need to do is drop the artwork in the folder with your DVD file(s).
Additionally, you can add additional optional metadata by dropping in an XML file from http://www.dvdxml.com/.
I can't get mine to play ripped DVDs. It can see the folders, but when I select the VIDEO_TS folder it says
No videos were found. To add videos to your Video library, press More Info an your remote control or right-click, then select Manage Libraries.
Anything I need to change in the settings?