Yes you are right. The dvd contains the progressive frames and pulldown flags are applied to make the framerate appear on the television as 29.97 fps just like the CAV Laserdiscs. At least this is how I interpret it.

The important thing to know is that the DVD's, Definitive collection laserdiscs, and the faces laserdiscs all originate from the same 35mm film which had the DVNR applied before it was struck to film(as far as I know). This 35mm print of the gout films was blurred before it was ever transferred to laserdisc or DVD.