Originally posted by: Doctor M
I think the Black Magic process (some sort of combination of laserdiscs release blending and/or film jitter extrapolation) extracts more information than a single frame.

Uhm, I think you're misunderstanding the term "Black Magic"... Blackmagic Design is just a manufacturer of video editing hardware. Laserman uses such an editing- and compositing suite, probably in conjuction with Apple's compositing software Shake. It features a couple of plugins that allow the tracking of an image on a "per pixel"-basis, which can be used to stabilize or retime sequences by creating new frames through automated "morphing", without the need for selecting the corresponding parts of the images by hand. Another one of these plugins is called "auto align", which allows the combination of different source images into a single image, again, through morphing and warping. One use of this can be the creation of panoramic images, by combining multiple still-shots, and automatically aligning the overlapping parts of the image to appear seamless, creating one big image. Of course, these images don't have to be overlapping only in parts, but they might as well overlap completely.

Taking several different Laserdisc transfers of Star Wars, getting them in sync with each other and combining them with the "auto align" plugin creates an "averaged" image of all these sources. A defect (like noise, dirt, dropouts or laser-rot) in one transfer gets evened out by the other transfers, and vice-versa, so that only the parts of the image that are the same in all transfers are remaining, adding up the detail to create a clean image. This is of course just a simple explanation of the process, and I'm sure Laserman has some more aces up his sleeve to improve the quality even further than "auto align" alone.

So, "Black Magic" isn't a process, but just the editing hardware used. The real magic happens with Laserman using Apple's "Shake".

Edit:
By the way, scaling a letterbox-image up to HD is pointless... you can't create detail out of nothing. Scaling it up to anamorphic is probably the highest you can go without looking too terrible (which by the way your image does... LimitedSharpen can only enhance detail... not magically create it where no detail was before).