It has even more to do with the 720p vs. 1080p TVs. The difference between BR and DVD isn't as great on 720p TV, because the DVD signal is blown up only from 480 scanlines to 720 scanlines. On a 1080p TV, the signal is forcibly blown up a lot more. Professionally, the maximum scale factor we judge acceptable (when we have to blow up raw footage shot too wide, for example) is 10% - over that we judge it's too noticeable. That gives you an idea what we think of SD signal like DVD played on HD screens!

Then the size/quality of the screen comes into play. If it's large and of high quality (smaller/more pixels), the difference is far more noticeable.

DVD is on the way out. It's SD and like everything SD it's obsolete. It's a matter of years and probably might have gone faster if not for the bad economy in the bigger markets like the US and Japan. Sooner than later, it will be available only in multi-format packages with BR/digital file/DVD, no longer as a dedicated product, and that will be the last phase before its extinction a a medium for commercial content.

At least the majors and the manufacturers have perfectly understood customer concerns and have done all they could to make the transition super smooth this time, opting for a format which player was easily retro-compatible with DVD and CD, and that let people use one device instead of three, and which remained compatible with the last SD TVs beside. It's a bit hard to understand why people hesitate to switch to BR or complain about the predictable disappearance of DVD soon. 150$ is cheap and it's for the average products of the big brands. It's but the price of a few DVD titles.