Fun with video encoding
There's at least four factors to consider when it comes to comparing a DVD and a Blu-ray:
1) TV size and viewing distance: the bigger the TV, the bigger the "dots" on the screen and the further away you can sit before you lose the detail. In simple terms, you can read a newspaper headline from across the room, but you'll have physically pick up the newspaper to read the actual article...
2) The source material: in theory, physical film maxes out somewhere around the "4000p" mark, so we're a long way off still, even with 1080p. However, there's no guarantee that the blu-ray encoding was done at this level: it may have been taken from whatever source was used to generate the DVD, or the company may have used a quicker/cheaper scan
3) The encoder. As with MP3s, not all encoders are created equal: some are optimised for speed (e.g. real-time encoding for your smart-phone's video mode), some are optimised for quality and some are just pants. And then you've got a myriad of settings to consider: you can perform multiple encoding passes, utilise b-frames, psychovisual tweakings, etc. However, these generally greatly increase the time needed to encode the film - and the person doing the encoding will probably have to go through the process several times until they've found the best settings
4) The decoder: is it software based, or does it have hardware to help with decompression, upscaling, etc? What about the TV's built-in processing system?
All told, depending on how the above things are handled, it's entirely possible for a well-encoded DVD to look better than a mediocre Blu-ray...
(for what it's worth, a friend has a HD projector which is projected onto a 6ft tall screen. He picked up a HD-DVD machine and a bunch of disks after Toshiba pulled out and we ran through a couple of sample films. The 1938 film Adventures of Robin Hood (with Errol Flynn) didn't look particularly impressive, but the 1966 film Grand Prix was simple stunning: the transfer had picked up levels of detail and colour that I honestly wouldn't have believed film at that time could deliver - I've spent too many years watching ye olde films on TV and VHS...)