Um...yeah. Where else is the drive suppose to be? Outside the headunit? lol
As far as a DVD conversion, I'm not sure what you're asking. If you're asking to play DVD [Data-]ROM's it already does, but if you're asking if you can swap in a DVD Reader to play movies, the answer is no. Why would you wanna go through all that anyway? It's significanlty cheaper and less work to just buy an aftermarket system.