As mentioned, there really aren't any 'total solutions' for protecting digital images. They are meant to be seen on a screen, and anything that can be put onto the screen, can be copied. Watermarks can be removed but tend to really lesson the impact of the images if they are used to intrusively (covering the whole image etc.).
There are several things you can do to make it harder for people to copy/steal your images...but the fact is that if you put them out there (CD, web etc.) then they are up for grabs.
One part of the problem, is that the general public are generally ignorant of image copyright. They don't think they are doing anything wrong by copying or printing images that you give/show them. So I think that you can help to alleviate the problem by educating your clients. Tell them what they are allowed to do with the images and explain how 'the system' is supposed to work. Hopefully your clients are the type of people who won't take advantage of you, once they know better.
As for proofing...I agree that giving clients a CD for proofing, isn't really a good idea. Besides the fact that you are essentially giving them digital copies of the images...it can also limit your ability to wow them with the images. I think that most photographers agree that the 'best' way to show clients images (when the goal is to sell them prints etc.) is to put them into a comfortable place (and state of mind) and show them the images in person. A great way is to use a projector and put them up very large...maybe with emotional music playing etc. If this is the only way and time that they get to see the images, they are more likely to buy the images right then and there. If you just give them the CD to look at on their own...they may not get to it right away...and the excitement will fade (and thus your sales as well). Also, they may be satisfied to just look at the proofs on their computer and never actually buy prints (or when they do, it's likely that they won't spend as much on prints).
I do my proofing on-line. It has many of the same pit-falls as giving them a disc, but it's better in some aspects. They can view, but also purchase prints right from my web site and they can pass the site along to their distant friends & family, who can also purchase prints etc.
But in terms of making money through print sales...the 'projecting' technique really does seem to be the best.