Quite a few threads on this general topic -
However, the short answer is that your video card does the scaling. If you're running 1080p to your display, then your SD DVD is upscaled to 1920x1080 @ 60hz. In other words, you'd have to work really hard to NOT upscale your dvds.
Are there better ways to do it? Sure - how much time have you got and how important is that last 5%? If you've got nothing better to do and really (really) want to dive in check out the FFdshow sticky-