Leave it as a DVD and let the player do the upscaling during playback. It'll look better.
I'm sure the experts will chime in here, but you may get some information by reading through the following post: http://forums.adobe.com/message/4804252#4804252 .
I would be very interested to hear what you discover with the Magic Bullet Instant HD as I was trying to do something identical to you recently, still somewhat in progress. IHD only works on progressive footage and from what I understand almost all SD footage is interlaced. I spoke with Red Giant and they said the footage would need to be converted to progressive first. I tried using Modify.Interpret to change to progressive, then created a sequence from that converted clip, then applied IHD to it. The converted clip looked terrible; IHD looked terrible too. Red Giant makes another plug-in called "Frames" that apparently converts interlaced to progressive that is available for trial. I haven't had a chance to try Frames and see if it produces a different result.
I've been meaning to ask Red Giant why they created this product in the first place as it would seem the buyer demand would be to upscale interlaced SD to HD (with software, if it can be done well).
^ Thanks. My footage was shot in 24p so maybe i will have better results. I will test it out for the heck of it.