Truth be known, Premiere Pro has one of the best scaling algorithms available. That being said, a good plug-in will make it even better. Red Giant "Instant HD" does a pretty good job ($99) and there are other similar plugs available. HTH.
DVD ought to be 720x480, so I would question the ripping method. Besides the lower 640x480 resolution, the format/codec you ripped to could also be affecting quality. In truth, you can simply copy the .vob files directly from the DVD to your hard drive (if not protected) and edit them right in Premiere, therefore not transcoding to another format that could cause additional quality loss.
Next, what is the intended destination of the final video? Does it HAVE to be 1080 at delivery? For instance if going to YouTube, edit the 1080 footage in a 720p sequence. The HD footage will still look great, and the SD footage is getting "blown up" a lot less, so it will not look as nasty.
If you plan to deliver as DVD, then simply edit everything in an NTSC sequence and don't blow up the SD at all, keep all the SD quality. Many workflow options, depending on needs.
Safe Harbor Computers
Or wait until october for a new feature in After Effects CC.
Scaling up SD to HD and beyond.
Saw it yesterday at IBC; amazing.