So, I had another chance to give the TPM BD a closer look and it isn't really that bad - both available HD transfers are bad in their own way but in direct comparison, the BD definitely wins over the HDTV/DVD master - it may have some of the grain removed but it has quite a bit of fine detail left in it and it definitely has tons more fine detail than the HDTV captures, so I think that if an HD theatrical reconstruction was to be attempted, the BD should be used as the main source.

Check this out:

Look at the detail on the tunic and Qui-Gon's hair and beard - I only have an 8GB 1080p HDTV capture of TPM, so the higher bitrate raw capture is likely better but I doubt it would make a huge difference in a low motion shot like this. I also tried adding some grain to the BD footage (3rd picture) and as you can see, it does give an illusion of more fine detail and I think it should be considered for a theatrical reconstruction using the BD as the main source.

The problem I actually find worse than the grain removal, is the color banding n the out of focus areas but there unfortunately isn't much that can be done about that.