Here is where the issues comes to play.
Yes things will look much better on the new iPad, however if you are watching video the encoding being used will impact the quality. If you have a low quality highly compressed video, all of those artifacts that would show up before are still going to be visible on the iPad display.
Think of the display like this. You know those signs they put up on the highway that say things like road work ahead, or Exit Closed. Those signs have a bunch of really big dots that light up to make readable words. Those dots are so huge that you can clearly see them.
This would be like comparing one of those horrible signs that display text to one of those new high tech billboards that look like a movie screen and can do all sorts of things like pictures and not just text.
On the electronic Billboard there are many more pixels packed in close together just like the new iPad. This makes it so that you cannot see the little dots as well as you can on the other sign because they are packed in so tight and there are so many more of them. If you had to pick between these two signs what one would you want? I know I would rather have the one that can display ads like that one showing american idol.
(PS. Yes I know the iPad 2 and iPad 3rd generation may not be this dramatic of a comparison but this is the same idea of what is happening. We won't know how much better it will look until we get our hands on one.)
