Because it would add $30 to the SRP of the GameCube. That's why MS is seperating it from X-Box. That's the cost of the license of the DVD playback protocols.
There will be a seperate DVD player/Gamecube combo unit, at least in Japan, made my Matsushista(Panasonic)
Just to elaborate a bit, that $30 per console figure is just to pay the DVD Consortium (I think?) fees, as Jeff said. Any given company has to pay these fees just to legally support the DVD movie format, put the DVD logo on their machines/boxes, and so on... But for the GameCube hardware to actually support DVD playback, it'd cost even more. If DVD playback had been a feature, GameCube would have been the third next gen console pushing the $300 mark.