Here's an explanation from cdfreaks.com that might help you out on the first question:
'...While many HDTV sets will accept a standard definition picture, the majority of these do a very basic upscaling in order to fill the display, such as simply repeating pixels in order to fill the screen. This can lead to a grainy picture, such as jagged lines, pixely looking writing and so on in the picture. While it is impossible for DVD upscalers to put missing information back into an image that was lost during the original downscaling to standard definition, upscalers work by using sophisticated interpolation on the picture during the resampling process in an aim to eliminate the side effects of stretching the image to a higher resolution conversion...'
As for your second question: Toshiba's HD-A1 player has upscaling capabilities for your regular dvds so there would be no difference in viewing vs. a standard upscaling dvd player. However, the HD-A1 only supports up to 1080i where as true high-def is 1080p (Samsung's Blu-Ray supports this resolution).
If you don't need a new dvd player I'd wait until the format war is over. I've got a crappy Samsung 5-disc dvd player that's displaying random white scanlines so the Neodigit's Helios H4000 looks good to me, (plus it's region free so I can finally get 'The Willies' dvd from Australia