There are probably two things at work here. Have you ever watched DVD's on a computer before (not just a Mac). Whenever you watch a DVD on a high resolution computer display, DVD's will ALWAYS look bad because they are upscaled and thus blurred to hell. Try playing the DVD at its original size in OSX. Does it still look blurry? If not, thats because that is the DVD's true resolution. Yes, DVD's are very low resolution, which is why it will be pretty small on your screen.
The reason DVD's look better on your TV is because televisions are low resolution displays and interlaced, so the TV "hides" a lot of the imperfections of the DVD. Try plugging your DVD player into a nice shiny new LCD High Definition TV, and I guarantee you that it will look just as blurry as on your Mac.