A 802.11g network would probably handle DVD bitrate video, it certainly handles high quality broadcast mpeg2 bitrates, however it's not very reliable. While it might not make a difference for transferring files or browsing the internet, when stream video you want a stable connection. Depending on the software you use, there might be enough buffering to smooth out the dropped packets but I can't think of any software that actually does support streaming direct from a DVD in a simple, one click action. VLC might offer the functionality, but setting it up each time you want to watch a DVD would get pretty tiresome.
A better approach would be to copy the DVD to disk, (I wouldn't bother re-encoding!) and then use a media streaming application, such as a upnp server along with a client on the One.
As others have suggested you might as well copy it onto a SDHC card, or get a USB DVD-Rom drive instead. Personally I plan to copy some of my recordings onto SDHC cards so that I can watch them on holiday etc. 4Gb cards only cost £5 and will hold between 2 and 5 hours of PAL (mpeg2) depending on the quality. I certainly wouldn't re-encode videos to higher compression codec like h.264 unless you want the battery to last 15 minutes - decompressing h.264 puts even fast desktop CPUs under pressure. If you don't mind losing a lot of the quality you can transcode to a lower resolution, but while this might be fine for an Ipod/Iphone with a 2in screen I wouldn't recommend it for the One.