For widescreen shows, this works fine. The problem is that the broadcast-network HD channels (your local NBC, CBS, etc.) still show a lot of SD material (news, reality shows, most game shows, etc.). They do this by adding extra pixels to fill out 480 lines to 720 or 1080, and then add bars on the sides (usually black, but sometimes blue, gray, etc.) to fill out the widescreen frame. When your STB or DVR outputs it as 480i, it adds the letterbox bars on top and bottom, so the original SD content is surrounded by blank space on all four sides, and is only 3/4 the original size in both dimensions.
Hopefully, either your STB/DVR or your TV has a "zoom" option that expands the image and gets rid of all that blank space. Some units do a better job than others. If it works out OK, it will probably still look better than the corresponding SD channels.