Recently i used virtualdubmod to convert Jeepers Creepers region 2 standard-def DVD (720x576) to 1920x1080, the picture looked really improved & yes i've tried the same region 2 jeepers creepers dvd in my PS3 via HDMI which was upscaled to 1080 & tried it on 2 other 1080 upscaler dvd players but it just didn't look as good as the 1080 conversion i've made. Is it better converting it then & burning it onto a blu-ray? I suppose put the divx file onto the PS3 & see what it looks like.
Just saw the thread now. It is my opinion that you are wasting your time. I currently have SD content that I do wish to convert to BD format, but I would rather keep it in SD since the BD spec allows this. If you enlarge the picture, even with a good filter like Lanczos3, you still won't benefit. A good filter ensures smoother enlargement with less artifacts - but it will not suddenly reveal the blackheads on someone's nose that you couldn't see in the previous SD format. Stick with the SD format and convert that to the BD spec instead. You'll save space, major encoding time and trouble. When fractal compression technology matures in a few years you can relook into getting this content to HD then.