Was the video noise part of the LD transfer or was it due to compression? I thought it looked alright considering the official release.
It wasn't because of compression. The original image was simply not that great to begin with (the final DVD image looks better than the original LD source, actually). The BR release was a single 2-sided LD release, compared to each Star Wars (Definitive) film getting (as I recall) -three- 2-sided discs. So Blade Runner had about the same length of film, on 1/3rd the data. So the claim that the DVD media was at fault is w/o basis in fact.
Unless you have a DVD or better source (or lots of extras), Dual-layer won't gain you much, if anything, in terms of video quality. There simply not enough data to begin with - you can't preserve what doesn't exist.