This is all said "tongue in cheek", because I haven't found where I heard all this... but,
My understanding is that a DVD is intended for the private viewing of the person (family)who buys or rents it. I think I've seen that "private" infers a limit, though I can't find that now. I'm a bit uncomfortable with this on a couple of grounds, regardless whether theatres do it or not.
A theatre that sells (rents) their room where one purpose is to facilitate large numbers to watch a DVD, whether it's owned by the theatre or not, might be pushing it a bit, and not owning the DVD may not clear the theatre. The facility is made available with one ingredient being the ability to exhibit a copyrighted work to larger numbers than would be normally found in the average home. I have nothing to prove this, but offhand it seems like a stretch of intent, if not an outright violation of copyright.
If nothing else, be careful with this. I wouldn't be surprised that it happens, but I wouldn't want to be the first to get caught if it's not OK.
[This message has been edited by rodeojack (edited November 10, 2007).]