I'm don't think I've heard anyone claim anything about image distortion on the new DSi screen, rather relatively poorer image quality, analogous to zooming in too close on a digital pic.
Take a 320*240 image and display it on a 14 inch screen and perhaps it will look fine but put it on progressively larger screens and eventually the appearance of the image will (does) suffer. Same thing if you hook a Wii up to a 60 inch screen, the image will not look as good as it does on a 37 inch screen. The 480 resolution standard was conceived at a time when no one considered the possibility of a 60 inch TV. Now with the DS we are talking about much smaller screens but they are typically viewed much closer than the average TV. It is possible that the DS's resolution is not optimal for such (relatively) large screens.
Now we aren't talking about poorer image quality per se but you are getting a closer look at the imperfections that exist in the image. Having not seen the new DSi XL in person though i can't comment on whether it is actually a problem or not.
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