iDVD2 worked flawless for me, and the video quality is great. It will only be reduced if you put more than 60 minutes of video on the disc.
Seems you are addressing slideshows. Of course, all images for the slideshow are reduced to 720 x 5xy resolution--- certainly, the images look quite poor now on a monitor, compared to the originals, but for a TV slideshow its just right.
A higher resolution wont be supported by the TV and they wouldnt even look much better than before.
Hope this helps. iDVD rocks... ok, chapters would be nice!!