Well, isn't the main problem that the source material is converted from an analog medium to a digital medium, then back to analog for your SD television? Not all SD channels look horrible, some of the HBO and Cinemax premium channels I've watched movies on in SD look pretty damn good. I admit some of Voom's SD had some really bad PQ issues, but they've gotten much better. Also DVI is supposed to be for uncompressed signals right? I noticed some channels look (especially SD) better with component cables on my HDTV, (makes no difference on my SD, so I just use COAX), and the picture looks even better.
I see no artificats or compression problems anymore or on my 36" Magnavox SD TV. I used to though, especially heavy sparklies on several SD channels. Having switched from Comcast Digital to Voom in March I immediately noticed that Voom had superior PQ over cable. Voom's SD channels look better than DIsh, and I can't tell a difference between DirectTV SD and Voom SD (Sparklies not included).
To test this I watched Lord of the Rings on my DVD on the SD TV, and then switched to Encore SD, they were showing the movie this weekend. Even cropped and stretched the picture looked sharp. On Encore HD the movie might as well have been playing off my DVD because even though it wasn't exact OAR it looked damn good. For some reason USA channel even on cable and Dish, always looked a bit more "washed" than other channels especially when they air their movies. I found USA only looked pretty good when they had some sporting or Live event going on (which is hardly ever).