Please note that DVDs are low resolution, I am not sure the exact one, but here is what Wikipedia says the possibilities are:
From Wikipedia
At 25 frames per second (commonly used in regions with 50 Hz image scanning frequency):
720 × 576 pixels (same resolution as D-1)
704 × 576 pixels
352 × 576 pixels (same as the China Video Disc standard)
352 x 288 pixels
At 29.97 frames per second (commonly used in regions with 60 Hz image scanning frequency):
720 × 480 pixels (same resolution as D-1)
704 × 480 pixels
352 × 480 pixels (same as the China Video Disc standard)
352 x 240 pixels
The following formats are allowed for MPEG-1 video:
352 × 288 pixels at 25 frame/s, progressive (Same as the VCD Standard)
352 × 240 pixels at 29.97 frame/s, progressive (Same as the VCD Standard)
So, to begin with, the DVD will not be playing at the correct aspect ratio and will be stretched/look bad if played at full screen.
Next, a DVD-Rip is not as good as a DVD, they (generally) use lossy codecs and the resolution may be altered.
I should also say, buy your DVDs, do not download them!
Lastly, there is nothing wrong with your machine, the fact that you can play 1080p videos from Youtube makes me think 100% that the only problem is your video source. If you get a blu-ray or similar, you can probably play it without problems.
To just confirm, try downloading Big Buck Bunny in HD, if you can play that at HD, you can confirm 100% that the problem is your source input file.
1Does this happen with any source material or just that particular one? What's the picture size of the movie (e.g. is it 320p, or more)? Is the Radeon expected to actually "make quality better"? Do they advertise this? – slhck – 2012-02-01T20:38:42.747
1Describe why it looks bad: too smooth, pixelated, bad colors, too pale (no blacks)? I'd try playing it with Media Player Classic - Home Cinema (MPC-HC). If it looks bad on that, it will look bad everywhere, as its quality has nothing to do with your video card. Actually video quality rarely has anything to do with the video card. DVDrips often look like R4 movies to begin with so I wouldn't worry about your laptop for now. How does non-video (Windows, pictures) look? How do the HD iTunes trailers look? – mtone – 2012-02-01T20:50:27.303
Also, there's a setting in video players AND video card drivers to adjust the video levels between PC (0-255) or TV (16-235) levels. Having this set incorrectly could cause the kind of results you're seeing. I'm not sure where is the option on ATI drivers. – mtone – 2012-02-01T21:00:52.577
Well i'm trying almost every video on youtube on HD 720p / 1080p for example and it's working like a charm. Also tried now the iTunes HD trailers and quality is as it should be (also 1080p play as 1080p).
I didn't install the Home Cinema from the Codecs preferances and the movies i tried had the same "quality" problem (don't know about video characterizations): sharpness of the image is very very bad. When i was watching a DVDRip in that previous laptop, it was just fine, nothing more. :/ – Milko – 2012-02-01T21:04:01.713
what was the native resolution on the old laptop? If you have a high-pixel count monitor, but the source has a lower pixel count, then the image must be stretched for full screen playback. Your older monitor may have stretched it less, resulting in better quality. My netflix streaming movies look great on my regular TV, but my brother's 50someish at 1080p looks horrible. Mine gets scaled down a little, his gets scaled up double. – horatio – 2012-02-01T21:42:51.247