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Sorry, I don't agree with the different stages you mention.
- stage 1 is of course protecting against 1/1 copy, SD don't do that
-stage 2 is to resist the longest possible time against reverse/hack. WC3 was out 1 week before the commercial release
-stage 3 is to resist to emulation. The most difficult
If a game needs an Internet connection, is has nothing to do with a CD and a pseudo-stage 2, because Internet is "just" a different medium.
In case of online gaming, if the CD is mainly a medium that support the engine and the server build the community, you don't really need to protect the engine...you only need to shut down fake servers.
Of course, in this case, the CD can be the medium of the first stage : offline gaming. So you need to protect it also
Concerning flaw two, you can complain if the CD is incompatible with your reader : a standart do not implies a law oblige you to comply with. As far as the licence fees are paid to the right companies... The reason Philips complain about cactus is because of incompatibilities with the readers, then argument with rainbow books. reason, then argument, in this way, not the reverse!
PS : english is not my mother langage, so I speak at least another one.
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