These heavily compressed audio/video's are.... well, total ****.
It's like when mp3's first became really popular, the vast majority had a run rate of 128Kb/s, simply horrid. Of course, if one was listening to them through what passed for a portable mp3 player of the day, with earbuds or tinny microspeakers, it probably didn't sound any different than a full-bandwidth CD.
Most portable or auto systems that play compressed formats today, top out at around 320kb/s, but if it's even middle range, and despite the limitations of the intrusion of road noise and the acoustic parameters of the cabin, I recently upgraded my older (6 year old) head unit, and found that I could pretty easily tell the difference between anything lower than 240Kb/s and a full 320kb/s (AAC or MP3). The difference in size taken up on a 64GB USB thumbdrive I came to the conclusion was a wash. (My entire CD collection can easily fit in less than 50% of that space).
Same goes in spades with video. I dabbled with DIVX a bit some 10 years ago (SD) and it was as horrid for video as those low-bitrate MP3's were for audio.
All I can say is, if folks think the picture or audio quality is 'good enough' then... they haven't seen anything really good. Very possibly their HD experience has been with bit-starved cable or satellite TV, or, poorly mastered Blu-Ray discs played on a very low-end system.
Folks need to search out some good, top-line, home theater vendors in their area to get a good recalibration of their eyes and ears. Now, I don't have a top-line system anymore, having been a VERY early HD adopter, although my surround sound system is still kinda hanging in there (good receiver w/ decent power, and more importantly, excellent main and surround speakers), but which, along with my main display, will need an upgrade in the next couple of years (maybe when this 3D stuff settles down).
Meanwhile, I tend to gravitate to the higher x264 recodes, and usually find that the source Blu-ray (rented) is, when the film and the mastering (both video and audio) is top notch, blows the recode away, when the size is (at 15GB+) about half the original size or smaller.
But my equipment is not 'consumer grade'. Then again, it isn't a 50"+ plasma either. But neighbors of mine who've been over always comment on how the video is sharp and color accurate (and the audio blows them away).
Look, I've got about 4000 burned CD's with tons and tons of those 128-192K mp3 rips from 10 years ago. I'll never listen to them, and I would want anyone else to either. Yuck.
A large percentage of them have been replace with FLAC.
Again, same with those first couple of years SD-DVD's I did. And replaced. OMG, what trash.