It doesn't make that much difference in practice. Most people don't have 60" 1080p screens 6 feet away from them. Standard widescreen DVDs look extremely good on HDTVs when handled properly. That means a non-interlaced (progressive) smoothly upscaled image. (Movie DVDs should never be recorded as interlaced video.) Not saying there isn't an improvement. I am saying it's not a good enough one just yet.
I was once of this opinion, but having played the 360 for an extended period of time, and watched some HD content on the 360, I gotta say, HD is truly impressive, and there's a pretty big difference between 480i, 480p, (SD and ED) to 720p, 1080i, and 1080p (HD). I still haven't seen a full length movie in HD though on my TV, but I hope to in the near future and experience HD movies.
I agree though that on a smaller screen it is probably not very noticeable, but I do happen to have a complete home theater system and setup.