I had this very same problem, a client sent me a DVD with .m2ts files in a BDMV folder structure.
After exhausting a few converter programs I fired up imovie08;
you see I did a camera test show for consumers once and the only way to get footage into FC was to go through imovie.
And amazingly imovie’08 recognises the DVD as a “camera”.
So I imported to a portable drive, and it puts .mov files in a folder for you.
Fast, and cheap (imovie is free with new macs).
Why does FCP not do it?
Who cares, here is a solution.
Incidentally I actually had to do it on my black Macbook as our FCP system only has imovie6,
you need at least imovie’08 I assume.
Bob