Methinks you know not of which you speak.The VHS looks MUCH better (as it should, at 4x the resolution).
Even under ideal conditions the maximum available analog bandwidth in a VHS system does not allow you to capture a signal at full NTSC (or PAL) broadcast quality. Hence S-VHS, which gets closer to full resolution, but is still not quite there. You inherently lose information, resolution, color depth, etc... when you go from broadcast to VHS.
(FWIW VHS has 240 analog lines of resolution and S-VHS has 400, while these don't correspond directly to pixels it's not anywhere close to 4x the resolution as you claim).
I really do find that SD (Satellite, DVD, miniDV, iPod/iTMS) content looks significantly better on my LCD HDTV than it ever did on the CRT it replaced. (EDIT: Only when viewed from across the room, up close you see the scaling and compression artifacts). Perhaps the TVs you have seen have used lousy scalers?
B