Many have offered your argument that watching DVDs is always best at their native resolution with projectors that display such without scaling.
I think that it depends on which projector you're comparing with. There are probably a lot of projectors with higher native resolution than 480p that look not as good as these Dark Chip 2 pjs running at 854 x 480.
On the other hand, resolution is only one part of the equation when evaluating an image. I used to own the Infocus X1 as recently as March of this year. I have noticed that when I purchased the H31, the image was superior whether DVD or HDTV. It was brighter, had more resolution when viewing widescreen material, rendered most colors with better accuracy and saturation etc...
However, I went through two H31s before finally opting to upgrade to the H57. The problem was that the H31s didn't hold a digital signal coming from an HTPC. Another issue was consistent tearing in the image from the computer whether analog or digital feed.
These two issues were resolved by switching to the H57. I also noticed that the H57 rendered reds with tremendous accuracy versus the orangey reds on the H31. The greater amount of pixels on the H57 allow me to sit closer to my screen without seeing SDE. It's also a much brighter projector than the H31 and because of it's design, doesn't 'leak' light out of the case as much as the H31. The H57 has better input capabilities than the H31.
Earlier in this thread it was stated that the H57 performed very well up against the H77.
But to your question, I have determined that watching DVDs at higher resolutions doesn't necessarily render a softer image. I find that the PixelWorks scaler is very good and I don't see an image from DVDs on the H57 that is softer than the native resolution that an H31 would display.
I also use the LG7832/ZenithDB318 upconverting player @ 1080i over component which I find absolutely superb on the H57 and also was the same on the H31. I never noticed a picture without the same amount of detail present as straight 848 x 480 or 854 x 480.
So, it comes down to trying it out for yourself and then deciding. Some people may not like viewing DVDs on a matterhorn or higher projector.
In my estimation, more pixels are better as long as you have a scaler that will work well. If not, then it's probably best to stick with the native 854 or 848 x 480 projectors.
Is the H57 worth double the price of the H31? To me it is. I've outlined a litany of reasons why. For those who're using the H31 only with DVD players then it may not be worth it to upgrade to the H57. With an HTPC, for me it was absolutely necessary to go to the H57 because I couldn't get the H31s to work with DVI from my HTPC and many others have had the same problem.
Now, debating the Infocus SP4805 versus the Optoma H57 would be a different story. The Infocus works well with an HTPC so I wouldn't have that problem to deal with. Still, in that case it's louder than the H57, won't render HDTV as well, and is now a relatively 'old' projector in the grand scheme of things.
I think that if you can afford it, it's always better to opt for more pixels in the long run. If you're main viewing is DVDs then this point MAY be debatable, especially if the projector with more pixels that you might be considering has an average scaler. In that case, the WVGA projector with fewer pixels may be the best choice.
You have to very carefully consider so many things other than just resolution though.
Another thing to think about is that if you're concerned about a higher resolution projector softening a DVD image too much, there are ways to sharpen it up without edge enhancement or ringing artifacts. If you do use an HTPC, there are programs available that could counteract any softening you might notice.
Anyway, this has been my experience and perhaps the H57 isn't the right projector for you price-wise or performance wise. You'll have to explore that personally to determine the answer.