According to HD Guru, most modern high definition TVs will upcsale standard definition content better than an upscaling DVD player will.
Of course, that statement is open to a lot of interpretation, and it will depend on what hardware is being tested.
Older or cheaper HDTVs may not fare as well against newer upscaling DVD players, particularly those with a lot of additional circuitry.
The article goes on to extol the virtues of Blu-ray. It's worth noting that many titles won't ever be released on Blu-ray, and those with a large library of DVDs generally won't spend money on upgrading to Blu-ray versions that exist. Nevertheless, Blu-ray players will also upscale DVDs.
I think the moral of the story is to look at your home cinema set up and then test out hardware to find something you're happy with.
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