Well of course DVDs don't look nearly as good as Blu-Ray's, but if you have a shit load of dvds, you still want to be able to watch them on your big screen without a bunch of shitty pixelated mess. If it did look as good as Blu-Ray, Blu-Ray would not be necessary. WTF? But I will say that interpolated dvd signals are a hell of alot better than not interpolated dvd signals.
Yes, having a 585p image is not as good as a 720p one. That is common sense and has nothing to do with interpolation. If the developers wanted to spend processing power on something else instead of higher res, it is probably a worthwhile sacrifice. Interpolation does cause a loss of image quality, but only if the output image is the same size or smaller than the input image, which would then of course be pointless in this case.
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