Also, here, let me provide an example for you of how even standard def upscales to blu-ray aren't a bad thing.
This is a picture of Roger Smith from the Big O. Hi Roger!
He is sourced from a slide projection likely captured from the original film elements. This is not a screenshot from the DVDs; it came to me as a 4761x3483 tif for use in an article I was writing for a magazine back in the mid 2000s.
Here is a sample of the original file in all its grainy goodness. I scaled this huge tif down to a height of 540, and then cropped it to a width of 720 to get a 4:3 image.
This was then further scaled down to digibeta resolution, 720×486. This is what a frame would roughly look like on a digibeta master for any digitally produced standard def show, and even some film shows which were later copied to digibeta... like I believe Dragon Ball GT was?
I then saved this as a PNG as my standard def source file. It is my base. I then created two branches from this.
First, this one:
This is a direct upscale from the original uncompressed image to 1080p, ran through a compresser, and resaved as a png. This is theoretically what a Bluray made from our standard def Big O Digibeta would look like:
http://www.twistygadget.com/stuff/upsca ... cale02.png
I then ran it through compression first, just like a DVD, and then upscaled it to 1080p and resaved it as a PNG. This is roughly what a DVD sourced from a Digibeta would look like upscaled onto your HDTV:
http://www.twistygadget.com/stuff/upsca ... cale01.png
Note how much the three little spikey bits of Roger's hair are wracked with compression on the back of his head in particular. Poor Roger!
(If you think I'm being unfair to DVD, here it is with half the compression:
http://www.twistygadget.com/stuff/upsca ... sion01.png ... still a notable difference in artifacts.)
Even with DVDs mastered from the best-of-the-best materials -- just like the Dragonboxes -- this is roughly what you're getting on DVD when you upscale it with your player. It's just the nature of compressing a smaller image like this and scaling it up.
So, in conclusion.
If done right: Upscale first, Compression last > Compression first, Upscale last. And that's straight standard def material; 16mm is higher definition. So yeah, if properly handled, going from those 16mm film masters to Bluray does have a great chance of looking quite a bit better.