First, that's an oversimplification - more accurately stated, it CAN look better, but only in certain circumstances.
There are, or were, many different DV cameras marketed during the industry's DV stage of development: consumer, prosumer, and professional models, some were superb, some just decent. The good ones were actually very good, and down-scaled HD would most likely not get any better.
However, there are a couple of reasons why some of the lesser DV cameras may produce inferior quality to downscaled HD. 1) the color space of HD cameras is typically 4:2:2, while DV cameras are 4:2:0, and thus the footage starts with much greater resolution and much more color information than material acquired on DV. And, when downscaling, the HD material samples all HD pixels, known as super-sampling, which gives the down-converted SD a bit of an advantage.
David Roth Weiss
David Weiss Productions
David is a Creative COW contributing editor and a forum host of the Apple Final Cut Pro forum.