The best you can get from a typical NTSC television system, is about 525 lines of resolution. Thats 525 regardless of the source being a DSS, cable, laserdisc, DVD, etc. It's 625 lines of resolution on a PAL system (Europe, South America). And of this 525 there's always going to be about 10% of that dedicated for the transfer of info such as Cloced Captioning, Emergency Broadcast signals etc.... So you're prob working with something closer to 480 lines of resolution.
The best you can get from a VCR is around 240 lines of resolution. Typical cable TV is about 240-280 maybe 300 depending on your service. A DVD can go up to about 500 lines of resolution and a Blue Ray/HD DVD 720 and up to 1080.
Typical HD TV goes above the 720 threashold and up (1080). Then there's 1080p (progressive)... I won't even start getting into the difference bet 1080i and 1080p. Lets just go with the basic numbers for now.
So if you don't have an HD TV then the difference bet DVD and HD-DVD is moot.
If you do have an HD TV the difference between HD/BlueRay and standard DVD is as noticable as DVD is to VHS if not more so. There is certainly a noticable difference in resolution between HD and standard DVD.
But aside from investing heavily in a Blue Ray or HD DVD, you can still bump up your picture quality a bit if you have a 'progressive scan' DVD player which although specifically designed to work with HDTV will still show a noticable improvement when playing on a standard TV and will greatly improve your picture quality on an HDTV.