I have a 3200 kbps H.264 mp4 ripped from the NTSC DVD-9 that I watch in my PS3, and (to me) it's indistinguishable from the DVD. Granted, 3200 kbps is a bit high of a bitrate for standard-def H.264 (most of my TV shows are 2000-2500 kbps and they look just as good), but I didn't want to take the chance with SW:R.
It could also be the media you burned it with. I recommend Verbatim - never had a problem with those, and they're the only DL media I've ever had that works.