Two reasons, ravi:
(1) As Jason mentioned, the deinterlacer in the DVD player may be of higher quality than the one in the display device.
(2) Everything else being equal, the DVD player has one distinct advantage -- it can deinterlace the image BEFORE it is converted to the analog format for component connection. In contrast, the display device has to first A/D convert the interlaced signal sent via component and then de-interlace it. Some information in the original interlaced signal may have been lost through the D/A and A/D conversion.
That said, (2) is becoming rather theoretical these days. It is usually the matter of the quality of deinterlacers in the player vs. the one in the TV. At any rate, I always suggest you compare both 480i and 480p transmissions. I know my Yamaha projector (with the Faroudja/DCDi chip) does a better job than my XBox.
