thought it was a media center.
Many make that assumption, but this is not an MSVistaMCE. The reason for the DHCP server is that LMCE is more than a "normal" media center, it can also be used as a "smart home" controller. Running temperature, alarm systems, lighting, phones... basicly everything you can access trough LAN/IR/USB/Bluetooth or RS232.
Hence DHCP server for the LAN devices. If you have a LAN enabled system LMCE lets you control it trough LMCE/the living room TV.
It also uses the DHCP to find all connected devices from Xbox, NATs and windows/Mac/Linux computers and lets you decide how to use them with LMCE.
Thirdly it allows you to network boot any (almost any) computer with LMCE regardless of the installed OS.
If you take away the DHCP server you have to set up every file share and system manually, and every MD you use will need to be a local install, possibly even a core (I haven't tried, so I'm not entirely certain).
That is why it needs DHCP.
There are ways around this however, if you only want to use the Core as an MD and it's the only one in the house you can switch of the DHCP in the router, let the DHCP in LMCE find all the necessary IPs and machines (this requires the core to be set up to the same IP range as your original router) the IPs of the connected devices woun't change as they are just renewing their IP lease.
Then after that you can swithc off DHCP on the Core and back on uin the router and your media should still be available.
Mind you it woun't find any new machines you plug in and you can't network boot or install local MDs.
I did it this way at first, but it is too cumbersome if you want more MDs. So I went for the DHCP on the core...