ISOs are a disk image. I assume your PC is simply reading the image via its internal DVD player. generally you have to mount the file as a disk image to play them back but its interesting that you can do so only by renaming them to mpg. Try ripping the files as a single VOB file anda renaming it to MPG. That might work.
Currently, MPlay and the Roku in general cannot read ISO files, which include the DVD Menu and Navigations. There are some issues with the Roku SDK that prevent an accurate read of the menus and related timings (or something like that).
There have been some rumblings out of the MPlay camp that true ISO files will be supported in the future if TheEndless and his dedicated team of programers and testers can find a work around solution.
I patiently wait and check back on the Roku forms daily for an update.
I doubt that it will help, but you can also check the latest version of Mplay that supports UPnP servers. I don't think it will help with your specific issue but it could help with the transport. I'm looking forward to trying it myself later this week.