A good friend who is quite knowledgeable about HT was looking at my setup last weekend. We popped in VE's Montage of Images and he had me pause on the flag scene with my Toshiba HD-A!/Ruby combo. Jaggies that were not clearly visible while playing were now evident.

Does this mean that a processor would improve my picture quality or is this just an artifact due to pause mode? Ninety-five percent of my viewing is on dvd. I'm adding DirecTV today so I've been thinking about a processor but I'd love to avoid the expense....

is this just an artifact due to pause mode?
More than likely.

This happens with video processors too, they are pausing on one field where two are required to make the picture.

StooMonster

When you're pausing, the DVD player does the deinterlacing, not the video processor. It's nothing to worry about. (In fact, this (and other related reasons) is why you can't examine the telecine cadence characteristics of DVDs by frame-stepping and pausing.)