A DVD or Blu-ray is more than a video file. It carries playlists, branching paths, menus, alternate angles, lossless audio and bitmap subtitles, and which of those you care about decides how you should play it. Do you want the disc as its authors built it, or just the film that’s on it?
If you want the menus, you want a native player
ISO, BDMV and VIDEO_TS sources can need menu navigation, playlist selection and playback state that a browser’s video element simply has no way to provide, and that work belongs to a native client of the VLC class, which still wants checking against the real disc for the title and the client you’re using. It’s also the path most likely to leave disc audio and subtitles alone instead of flattening them first.
In a browser, the server converts
For hosted web playback the server reads the disc source and builds a browser-compatible HLS route, and it remuxes where it can and transcodes where it must. You get the content. There’s no interactive menu engine on that route, and bitmap subtitles may have to be burned in when the far end has no way to draw them.
Most libraries want a remux
If the menus and the extras are beside the point, you should store the feature or the episode as an MKV-style remux with the tracks you chose. And matching gets simpler, as does picking a source per title.
If archival fidelity matters to you, keep the disc image somewhere else as well; a media server shouldn’t hold the only copy of anything you can’t replace.