Viewing is all about distance. DVD looks great on a 27" TV from across the room, but when you get right up on top of the TV you will see that the DVD has artifacts. The artifacts are part of the DVD and the player you own can contribute to a loss in quality.
You don't want to hang anything on new 1080p televisions as they will likely be expensive and the first batch I highly doubt will accept 1080p input. I would never buy a 1080p television that doesn't actually accept 1080p. So, go with a 720p display.
Now, you have a lot of choices in large screen display technology, and CRT is still king if you are willing to live with the size of the set and a dimmer image. The nicer Mitsubishi sets look fantastic. DLP & LCD, in my opinion, are very close in quality, I personally would probably go with a Sony LCD set in the 50-60 inch range, but that's just me.
Plasma and flat LCD displays easily have the worst image when compared to the rear projection models. But, they also are bright enough to view in a bright room and will last for 10 years with no adjustments or problems that you will need to deal with. A TON of cool factor, and the ability to hang on your wall, so you get your room back. Not what I would consider ideal for a theater though. More a family room product.
If I were you, I would buy a TV based on the quality of the TV first. Once you own it, then you need to maximize the image quality from the DVD player to the set. If you know the set is good and DVDs don't look that good, then you may need a better DVD player. The typical issues with viewing DVDs are not that the TV is creating issues, but that the TV is so good and so big, that it shows DVD issues that always have been there.