It could just be using a really shitty upscaling algorithm.
Actually I probably don't know anything about the brand, but maybe you should look it up. Not all upscaling DVD players are equal. Then again some DVDs look worse when you see them clearer because it becomes apparent that they did a really shitty transfer, but others look a lot better.
As for bluray, I switched between the DVD and Bluray versions of Pirates and the Caribbian, and nevermind higher res, just the color depth alone is fucking infinitely better than anything DVD could ever offer. It's like Bluray is the rainbow and DVD is Quake 1.
Anyway, that aside, it's nice seeing the texture on peoples' clothes, skin, hair, even the grass and buildings or whatever you're watching looks a shitload better just because it looks like everything got a coating of high res textures. Unless you're watching something that uses depth of field blurring all over the place, but even then you can still appreciate the stuff in the foreground.
Last but still definitely important, I have yet to notice extensive JPEG-style artifacts on bluray movies. At first I didn't even notice them at all, but then I paused a fast scene on a movie that was just brought over from HDDVD (which has a lower video bitrate, about 2/3 what Bluray has) and then I saw a few issues.
All in all, Bluray really does make DVD look like VHS. You just have to be under 65 to appreciate the difference. So no, your grandma probably won't care, but everyone else can definitely appreciate the quality on a large TV.
Another thing, if you're hooking up Bluray on a composite 480i TV, then there's no difference between that and DVD, so don't bother. But if you plan on getting a HDTV in the future, at least buy your favorite movies on bluray. You won't be sorry.