Are you getting a progressive scan image? Yes you are. Computer monitor display is by design, progressive scan. This and the fact that PCs can scale an DVD video image so cleanly is one of the big reasons why using a PC in conjunction with a projector is so popular for producing the absolute best quality video presentation for DVD possible.
Are you getting a digital image? Maybe. Standard HD-15 connections on graphics cards and monitor plugs are analog RGB connections. The image is rendered digitally, and converted to analog, runs through your monitor cable and is then converted back to digital before it is displayed on your monitor. Since standard computer monitors are typically around 19", you don't see most of the artifacts introduced during this digital to analog conversion. Do the same thing but with a digital projector, and you will begin to see some artifacts introduced from this process. That is unless, your video card and monitor support the DVI (digital video interface) format. In this case, there is no DAC untill the video image is being rendered on your display device.
Only if you have a very very very very discerning eye. Most likely, you won't be able to see the artifacts on a 32 inch screen unless you knew exactly what to look for, namely, the difference between a compression artifact and a equipment introduced artifact. This is of course, only after you have had your HTPC tweaked properly. Keep in mind a standalone DVD player has to go through the same DAC process. It is just an HTPC renders DVD video ever so better thanks to more video memory, better read ahead (no layer change pause!), software tweaks, etc. So, I wouldn't worry too much about it.