It goes back to the DVD menu, and stays there. This is the known behaviour of libxine.
There are no wizards for media scenarios, and some should be made, at least until we can rewrite the web admin. There is plenty of architecture in the Web Admin to add additional wizards/etc (much like the lighting or climate wizards), but somebody just needs to DO IT.
As for the media system structure, your disconnect happens because you do not understand the system. You're trying to control the end points, instead of letting the system make decisions based on what you want to play and where....
By using the MH (The Media Handler), the system knows that you're wanting to play that media, and can send the appropriate messages to other parts of the system.
As for tuning, this is a known issue, and can be resolved by a little extra code in the mythtv player. For now, assume that anything placed in the Filename field of MH Play Media starting with CHAN:XXXX, is a channel identifier. You can see these channel identifiers by looking at the chanid column in the channel field of the database. so i1806 would tune to channel ID 806 for me (which would be my cable box's channel 806) after MythTV starts. It isn't like this now, but assume that it will be, as soon as I or somebody wites the relevant code. This also gets rid of the extra tune to channel command, as it is now done inside the mythtv player at start.
AGAIN, before you start retorting, I KNOW this isn't ideal, but no UI has been written to handle this, so you're sending commands manually. Either help us write the UI, or deal with it. Those are the breaks.