Raymond,
Yes, mythtv does handle hardware CI's correctly (as does VDR; I used to use it previously, I'd recommend you to try it too, if you have the time and patience required for setup).
> The ci part needs to be done by the dvb-card firmware. Not in tvheadend.
This is not true AFAICT, though I don't know much about the inner workins of the CI's (or the Linux DVB API), so I could be wrong. But I conclude so, because mplayer, nor tvheadend, can receive scrambled channels, while software that specifically state that they can use descrambling (that I have tried), can.
So it is not totatlly transparent to the software. A CI device node needs to (currently at least) be attatched to a frontend device node, and even then, the CI+CAM needs to be activated by software - and the TS relayed trough the descramlber. Or somesuch.
Someone could prove me wrong, if there's anyone using a CI+CAM (i.e. not a card reader with some kind of software CAM - which is illegal in a lot of countries for this purpose) with TVheadend.