It is most likely because the players are connected to the displays with composite cables. Don't laugh. Check for yourself the next time you visit a big box store.
I know what you mean!
I noticed last night that at my local BB they had the Transformers HD DVD playing hooked up to the TV that was their Blu-ray demo set... the irony I know. In any case, this was the rare exception to the rule with HDMI 1080p being used from the HD DVD player to the display. It was a 40" LCD screen.
The image was so clear and detailed from 2 screen widths back that random people kept stopping and staring. That included an elderly couple!
Of course, displays like this don't really let HD shine at the proper viewing angle... closer than 2 screen widths and the set revealed it's own video noise that hampered the image. But even from 2 screen widths away it was shockingly better than any 'DVD' out there... and even average passers by were impressed enough to stop and stare!