Personally, I think the DVD upscaling in Macs (well, specifically the Macbook) is lousy when compared to even a lowly progressive scan DVD player.
I have a 5 year old Toshiba progressive scan DVD player hooked up to my 1080p TV via component. By letting the DVD player deinterlace to 480p and then my TV to upscale to 1920x1080, it gives a noticeably better picture than the Macbook outputting at 1080p.
I would be willing to bet that dedicated upscaling DVD players with special chips (i.e. Faroujda) would be even better than my DVD set-up.
ft