While visiting friends in Auckland, New Zealand in 2003 we were at an America's Cup race where we met a producer who was working on LOTR (this was right after shooting had ended on the 3rd film). He was, and presumably still is
, a very nice guy and we had a pleasant chat about both the books and the making of the movies. At the end of the day, he had to go back to Wellington but he was nice enough to invite us down for a visit. This is where Jackson is based and is also where all of the studio work and CGI (WETA) for these movies were done. Needless to say, we jumped at the opportunity.
Anyway, to this LOTR nerd who has read the books at least a dozen times over the last 30 years, it was all pretty awesome. But the highlight of the visit was our tour of WETA Digital. We saw the impressive (for the time) "render farm" they used for all the CGI as well as this huge scanner they used to scan the raw footage and laser printer they used to print the final product to film. While looking at the scanner, I asked the engineer at what resolution they were scanning in the film. He said 1K. I was kind of surprised because even then Blu-Ray/HD-DVD was a hot topic and everyone knew that they would be 2K. I asked him about this and he said they did a test with Peter Jackson where they presented him images scanned at 1K and 2K. He decided that he couldn't tell the difference between the two so he told them to use 1K.
So, it seems to me it doesn't really matter how well the final films were encoded for Blu-Ray. They can never fix the fact that the raw pre-CGI footage was scanned in at a quarter of the resolution it should have been.
I always thought that when the HD version of these movies came out there would be serious image issues.