No surprise that you couldn't play closed format files.
The codecs are legally barred from free distribution in most countries, and so cannot be put on the cover disk.
Windows may or may not play them, depending on the version (some are licensed by MS) and the codecs you have installed.
Without knowing your NAS device, the login request is probably due to the network filesystem.
I would guess that it is a version of Microsoft's CIFS. Not all distros have the Samba client installed by default (it is a Windows filesystem after all, not a Linux one), and those that do will not have a user configured for your NAS.
As for shutdown confirmation, it is there to stop you accidentally shutting down when there are other users logged in. Linux is a multi user system by nature.
Some of the quirks and limitations are most likely to do with the LiveCD format and its implementation, not Linux per se, but then you can't get a windows or mac LiveCD, can you?
A LiveCD is by nature a demo environment (apart from one or two notable execeptions like Puppy Linux), and can not have codecs, etc installed.
A full installation is very different.
The sig between the asterisks is so cool that only REALLY COOL people can even see it!