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I can't say I prefer it as I've never owned a widescreen set, but certainly watching widescreen DVDs in anamorphic 16:9 mode on my old Sony (before it broke) was very enjoyable.
Of course on a 29" screen, I only got a viewing area that was an inch or two smaller than a 28" widescreen set would be, which was okay for my needs, but most people would prefer to get the most viewable area for their money, so for DVD watching, a widescreen set is preferable - image quality should be no better on a 4:3 set than on an equivalent quality widescreen set.
Certainly in my mind the remainder of my viewing habits is the clincher, despite having Sky, a lot of the programmes I watch still aren't broadcast in widescreen, so a 4:3 set for this is preferable. With an eye to the future, if I buy a replacement for my busted Sony then I'll be going widescreen for the simple reason that there are no 4:3 sets with prog scan capabilities (to the best of my knowledge)
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