You can order the rear seat video system in a 300C, I just noticed it today, 3.6.05.
Don't shoot me if this option is accidentally in the ordering system, and disappears within a few days. (Entirely possible).
From what I understand it is as Taha said, as in the chevy malibu commercial.
The DVD does not play through the nav screen but through its own screen. I think audio can be played through the stero system (VES) as well has has its own wireless headsets.