Even watching over yellow composite most people thought DVD offered a better quality. But most people had their VCR's hooked up by RF as well, not yellow composite. Of course the best way to watch VHS was through S-Video.DVDs caught on quickly because a flat disc was a radical change from the clunky plastic rectangle that was VHS. Blu-rays are pretty much just fancier DVDs, and thus never grabbed as many people.
But streaming will never match DVD's quality when you are dealing with 480i. Most SD shows on streaming sites, including DS9 & Voyager, have the resolution of an NES---240p. This is due to half the fields being removed and the remaining ones being duplicated.
But I was just watching the Season 1 set of DS9 on my PS3 recently, and even in 480i, I couldn't get over how soft and washed out the show looked. It was almost like the cameraman took some pantyhose and has shooting through it.