If your DVD player is outputting prog scan, then it is already deinterlacing, and will be reducing jaggies itself.. the more it upsamples, i.e. to 720P/1080i, the more jaggies it removes.. also, the TV will smoothing them out as well, so between the two, it wouldn't surpirse me that at 480P there where no jaggies..
This is only a small part of the processing, There is more 'temporal' processing, (time related processing) then anything else, this improves a moving dynamic image, all this "3D motion compensation", looks at how things are moving between frames, and tries to 'smooth' these out..
These changes are sometimes hard to spot, pausing the DVD does not show much of the processing, its more the dynamic processing, as things are changing that makes a big effect..