How would the challenge/serial have worked if implemented correctly?

Since the challenge rotate every 5 minutes, there must be some way for a user to enter against an old challenge, right? Else they call, get a code and nothing.

But even with that out of the way, the decryption key must be the same across all discs, since there is only 1 master disc.

So the challenge/serial must combine to create a decryption key, which can be shared across users.