I got this reponse from a guy in another group and though it worth
repeating here since nobody seemed to know this:

--- In lw3d-disc@yahoogroups.com, "Ren" <ren_at_work@h...> wrote:
> Hey Don,
>
> its from the old days when DV was too much to process at
> full size playback on your average Mac/PC...
> so if you were lucky enough to be on a sexy machine you could
> enable the high quality and gain from your higer spec machine.
>
> now we all own at least one sexy machine so it would be nice
> if it was replaced with a "low quality" check box eh?!
>

Look under Movie Properties/video in Quicktime Pro. Check the "High
Quality" box and save. No more fuzzy, non interlaced low-res proxy
video.