MPEG compression is what is used for DVD's, so that is not the problem. I would be happy w/ DVD quality channels.
I'm not trying to be argumentative... and I agree DVDs look better than most of the digital SD on satellite or cable... but MPEG compression is still a loss-based compression algorithm. In theory, and without being too technical, MPEG attempts to "average" changes in the picture out and has a formula by which it "throws away" pixels that are deemed to be less noticable.
Even the best (including Superbit DVDs) still have flaws that you can see if you have a large enough TV and good enough eyesight. You just don't notice it as much as you do on satellite where the compression is turned higher.
Problem is, they need to compress it somewhat or we'd only be able to have a fraction of the channels we have... and like you, for SD I can be happy most of the time with DVD quality if that's what they would leave the compression at... but history is proving that isn't going to happen.
We can only cross our fingers that MPEG4 lets them have their bandwidth and we get an improved picture as well... but I'm not ready to hold my breath just yet.