Playstation3 does a pretty good job at upconverting standard 480p DVD material to 1080p. Just make sure to download and install the latest firmware to get those results. Out of the box, my PS3 didn't do a good job with DVD upconversion (everything was very blocky and rough with big pixels). The update to the latest firmware made a big improvement.

While upconversion of DVDs can work pretty well, even the best results of upconversion are still going to pale in comparison to native 1080p HD video quality. 1080p/24fps video on Blu-ray reveals so much more detail and image sharpness that even upconverted DVD will still seem like a major step down in quality.