That 'copy protection' was just extra flash memory that contained chinese characters. iQue DS games look for chinese characters and crash if run on an normal DS. Normal DS games run just fine on the iQue version but just don't access the extra memory chip.
I guess their contract worked out pretty well the first time around to just ship the standard version around the world and hire iQue to add a flash chip for the China version. I guess if the DS is made in China anyway, it's not that big of a deal.
The big deal in China is software can be copied (somewhat) legally, so there's a lot of MMO subscribers. While they might not have any copyright protection on the software, they can still control access to the servers. I guess this also means that Nintendo plans to make a profit on every 3DS sold, and don't sell their products at a loss like MS and Sony since they aren't guaranteed to make significant software sales in China.
