I don't think there was ever a chance of Lucas releasing the SEs on DVD in 1997. That was the year that DVD was introduced and it was so new that many "big pictures" opted out of releases. Also, this was in the midst of the DVD vs. DivX war. Many people were waiting it out to see who would win. Finally, George was just getting back into the PT at the time. Why spend the time testing out a new technology that no one is 100% familiar with and give it a half-assed shot at best?