tinyE: Oh and I watch mostly DVD but they are all in widescreen format. I don't know if that matters.
The part about DVDs is that the native resolution of them is 720x480 pixels. Thus, if you ask for the DVD video to be at 100%, that is the size of the image. If your monitor/tv has a native resolution of 1280x720 (HD Ready), the DVD image will fill a bit more than a quarter of the screen, and will have to be zoomed in to 150%-200% to be played full screen.
If your TV is Full HD, thus the resolution is 1920x1080, the dvd will fill even less of the screen, and will need to be zoomed in more to be displayed in full screen.
Take any of the avatars displayed here, zoom in to 200% and to 300%, and see how they become distorted. While a few televisions and dvd players do have some routines to display the dvds a bit better, the upscaling is not always good, since if you start with decent quality, you can't get excellent quality.
BluRays on the other hand have a video resolution of 1920x1080, thus have to be zoomed out to be displayed in HD Ready monitors. Zooming out though doesn't distort the image that much, since you do start with excellent quality.
In both cases, if the monitor is medium sized (up to 32" or 36" I'd say), the difference isn't that bad. But if you go for the large to huge sized monitors (42"+), then you may have quite a few artifacts on your DVD collection.
As for the distance, the rule of thumb by
Amazon is
Amazon
Minimum TV dimensions = Viewing distance / 3
Maximum TV dimensions = Viewing distance / 1.5
Take it with a grain of salt though, since Amazon is a store after all, and it would prefer to sell you a 42" TV instead of a 36".
I think there were a few discussions here about what TV to get, though can't look for them right now.
Edit: Had the wrong resolution in mind for HD Ready, fixed it.