With a Web DVD, one just needs the HTML to "run" the DVD. Not sure why IE is not working for you though.
This THREAD from the Adobe Encore forum might offer some tips, though the OP needed to upload the output to his Web server. Still, might be some tips that will help you.
. 1. IE will show security warning on playing active content. There are ways to avoid this. Please refer to steps below.
2. Flash video not playing could be because of Flash security settings. Browse to this link and add location of your files in the path. You should be able to play the video after that.
Steps to avoid Security warning in IE:
a) To allow any Web site to run scripts and ActiveX controls on your computer:
In Internet Explorer, on the Tools menu, click Internet Options. On the Advanced tab, scroll down to the Security section of the list. Select "Allow active content to run in files on My Computer" check box, and then click OK.
To do this using windows registry, modify "HKCU\Software\Microsoft\Internet Explorer\Main\FeatureControl\FEATURE_LOCALMACHINE_LOCKDOWN"
set "iexplore.exe" (Reg_DWord) to "0"