In a nutshell, both versions started with the same transfer, but the Def. Col. has a number of documented problems, and the transfer had a lot of extra processing as well. The Faces set came out a few years later, and has far fewer problems.

A lot of people argue about the CAV vs. CLV difference, but newer LD players have digital memory which allow you to pause on a frame regardless of the format. Also, the last side of Faces: ANH is in CAV anyways, which is the most exciting part. Either way, there's a truly unremarkable difference in quality between the two formats - most people would never notice it.

Personally, I find the colors and contrast of the Faces set to be far superior, and having fewer sides/discs makes it easier to capture. I have the Faces set for my (original) transfer, and the Definitive Collection for the extras.