As you've said, the show was filmed, but editing -- and most if not all visual effects -- were done on professional-grade video, which has lower resolution than DVDs are capable of displaying.
As for why the DVDs weren't mastered from the original film source, it would have been very
expensive to do. The entire episode would have to be reassembled from film, using the videotaped final version as a guide -- and for any shot containing visual effects, the shot would have to be either taken from the videotape -- with an obvious drop in quality -- or completely recreated -- which at the time would have been very expensive.
Given what's being done with "TOS-R," however, it's possible that TNG might receive similar treatment, although I suspect that its per-episode cost will be much higher.