You need an upscaling DVD player. On a TV that size and at a normal viewing distance DVDs will look fine.
edit: The Xbox 360 is a terrible DVD player if that's what you're using.
And when Willco gets his PS3, that issue will be solved. IMO DVDs on 360 look good on a PC monitor, but on an HDTV?

PS3 looks much better. I find it the same for the BC games, too. PS2 games look better upscaled than the Xbox original games do.