Hi, what is the difference between PC and XBOX DVD versions? Can the XBOX DVD also be used to create the MPEG file for use with Daphne?

The DVD Game (regardless of platform) can be used on Xbox, PS2, PC (with a DVD Drive and DVD player software), or even a stand alone DVD player (using the remote to control your moves). My PS2 version works on my PS2, Xbox, PC and DVD Player.
However, I prefer to play DL on my "MAME/Daphne" Cabinet. The DVD version is too slow and glitchy.
In the end, marketing is basically the only difference (the little label saying what platform it is packaged for). All the platforms are utilizing the DVD function of the given platform.

To answer your second question of whether it can be used to create an image for Daphne its a sad "no". You need to use the "DVD-ROM" version for PC to do this. The DVD-Video that is in reference above is not applicable for Daphne conversion and emulation. Hope this helps

Well, it seems that it is now possable to make an image from the DVD-Video to work with Daphne. However, I have not done this myself, but I understand there is information for it here in the forums.