Yes. In DV (like what consumer camcorders like what I used to capture it the first time) compression, the color is sampled only once per every four luminance pixels. When one well saturated color sits on top of another (like the red of a lightsaber vs the blue of cloud city) then you can see the effect of only having one quarter of the color resolution. This is called 4:1:1 sampling, as the luminance is samples 4 times as often each color component. Mpeg2 on a DVD handles two color samples per every four luminance pixels horizontally, but it also only records color for every other line. Since it doesn't even have a color sample on every line, this is called 4:2:0. Due to the original capture being DV, it ends up being the worst of both wolrds on DVD (4:1:0) sampling. This is why the color seems to blur out.

This is also in fact a reason why I want to slap everyone bragging about their Canopus AVC-100 DV capture boxes. DV compression absolutely blows. Once I figured out how to work around the quirks of this $50 capture card, it ended up that it records as good quality as any professional equipment, and I can say this safely because I work at Avid. No matter how good the analog stage of the Canopus stuff is, it is compressing to a format that will destroy the quality. I use huffyuv lossless compression so there are no digital artifacts whatsoever until I run it through CCE.