Its my understanding too that DVI sends a digital video signal rather than an analog, and that HDMI also sends a digital audio signal. The difference between an analog and a digital signal is substantial but does that mean that its better? Vinyl records are analog and CDs are digital yet most audiophiles prefer vinyl.
Digital is used to make the damaged or lost part of a signal more likely to resemble what it was than what it has become. But even more it is used to compress the signal so more can be sent cheaper. The more compressed the digital audio/video signal is the more you hear/see what the programmer 'thinks' should be there. That does not mean that it 'is' what was there.
Think of taking a photo and running it through a paper shredder very carefully so that it comes out flat and completely visible instead of twisted with some strips overlapped and twisted, or turned over. Now take out every other strip and slide the remaining ones together, thus 'compressing' them. Easy to see that if you had to ship several billion of these somewhere you would save a lot of money by compressing them so that only half had to actually be shipped.
But it won't look very good when it gets there will it? Well luckily the people looking at it have a computer program that can look at the strips and fill in where the removed strips were with information that blends well with the strips on each side of it and fills the middle with images that make sense.
Now those looking at this may well think this looks pretty good. Especially compared to one sent in its entirety (read as analog) that was scraped,smeared, and maybe even has small tears in it. Which might well be the case if the shipper wanted to ship basically twice the volume and weight of the previous ones (read digital) for the same price.
But if you are on the receiving end only, while what you see may look good, you really don't know what it looked like to start! Its just possible that no matter how well it was shredded and how well it was put back together and how good the guess of what the missing information was and how well that was combined with the actual information that was sent, (breathing break), if you saw one that was never shredded and was sent without any damage, you might think it was better. Maybe not but at least it would be what was originally created.
'Digital' is simply a method to make information easier to manipulate, store, transport, and retrieve. Its not magic. At its very best you end up with exactly the same information which you started. It can be absolutely wonderful for making sense of damaged information and can make great reductions in the price of having information delivered. But it isn't something you can throw information into one end and have it come out the other end somehow 'better' information.
Can I live with something that looks close to what it was to start with in order to have my cable or satellite bill be $150 a month instead of $300? But bet I can. But I don't have to pretend that I'm always getting something better because it has the buzz word 'digital' applied to it.
The signal I watch has been digitalized to a satellite, from it to my cable company, and to my DVR tuner. So just how analog is it going from there into my TV via component cables? Is it going to be much different from the digital one traveling out the hdmi on the DVR to the DVI on the TV?
I've spent three months agonizing over the fact that I couldn't get any picture through the 'wonder cable' for unknown reasons. I suspect its a copy guard caused problem that Sony would blame on Scientific Atlanta and vice versa leaving them happy and me in the same place.
Anyway on one of my more recent attempts it worked for about ten minutes. I would be very hard pressed to pick one picture as being better or even different from the other. Granted I didn't have a chance to recalibrate the TV. But I don't think that really should make much difference. As a retired TV dealer I realize that probably over 99% of all TV's are never calibrated the first time.
While HD is a great improvement over STD its nowhere near the quality of the HDTV demo I saw at a CES way back in the 80's. Of course that was a DEMO and didn't have to include a STD signal, nor did any compromises have to be made at that time to met the government's approval.
My advice would be that if you are happy with the picture using component cables, then don't even think about buying even the cheapest dvi cable.