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You certainly do need scaling and interpolation to transform a 720x480 frame into a 1024x768 frame. Those extra pixels don't come from nowhere. In addition, DVD pixels and plasma pixels aren't even the same shape. DVD pixels are 1.186 times longer than they are tall, while plasma pixels are 1.33 times longer than they are tell.
The only way you could watch a DVD fullscreen without any scaling or interpolation is if the screen had 720x480 resolution.
And 1080p on a wide pixel display might look better than DVD on a square pixel, but 1080p on a square pixel display would look best.
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