I think all DVDs look terrible on my 24" iMac - but I blame the low resolution of DVDs, not the iMac. When I download HD content to view, it looks spectacular. I'm used to watching DVDs on my analog TV set, and I think they look much better there. I think part of the problem there is that I'm sitting far away from the TV set, but when watching DVDs on a computer I'm right in front of it and can better observe the graininess.
I think it is the resolution issue. I went to an Apple store today to try out the DVD on one of theirs. I also brought the coputer just incase we needed to try the two side by side. The DVD looked better, still not great, on the store's 20" than on mine. So, we brought mine in and tried it, and it looked the same and theirs. The guy I talked to said that the resolution was most likely what it was. Also, when I tried the movie last night for the first time, the colors were way off and it looked absolutely horrible. The worker said that it was probably because the room was basically dark except for the iMac so errors were much more visible. While at the store, the guy cntr-clicked and played the DVD on normal size instead of full screen. It looked much better, just small. So, I think it is the resolution, which I had completely forgotten how much better a monitor's resolution is than a TV's, and the dimly lit room that made it look bad. So I think we can safely say that DVD playing full screen on iMac + dimly lit room = no good.