You can right-click on the image on the Monitor and set it to Best.
Other than that, there's not much more you can do (depending on your computer monitor's resolution and setup). That it looks good on the DVD says that you've got a good workflow from miniDV.
Though the un-Rendered footage on the Timeline is seldom seen as "pixelated," it can be blurry.
There will likely be red lines above the Title, and possibly some of the Video and Still Images. If one Renders, by pressing Enter/Return, those should turn green, and then one will have the best possible playback.This ARTICLE goes into more detail.
Also, having chosen a correct Project Preset, at New Project, can be very, very important for best quality. The Project's Preset should match the Video Assets - the Source Video Files.
Also, if the Still Images are overly-large, Scaling in PS, or PSE, prior to Import, will likely be helpful for both quality and for the necessary processing overhead, required to internally Scale the Images. For Scaling Still Images, this ARTICLE goes into more depth.
What are the pixel x pixel dimensions of the Still Images?
Doing as you suggest Steve has made an improvement - especially if I keep the monitor relatively small. It is still a bit blurry but that could be the subject matter. Still not the quality I would have expected from the upgrade though.
Thanks for the reply
Thanks for the advice Hunt.The photos I was originally using were unedited and therefore rather large - pixelwise. Smaller photos don't seem to have the same problem as reported.