There seem to be three qualities of video projection in movie theatres today.
Pre-show advertising using a $1,500 LCD video projector with either a DVD player or being served by a computer with Quicktime or something like it. It's usually low quality, painful to watch, doesn't unnecessarily fill the screen and looks awful.
Some theatres, mostly art theatres are equipped with $6,000 to $50,000 LCD or DLP projectors with special ordered lenses. These theatres may have DVD players, Betacam SP decks, Digibeta decks, Mini DV and the like. The better ones have switching capability as well. These usually look acceptable for video presentations. The images are bright enough and fill the screen. Nobody will be fooled by it, but it gets the story told.
Lastly there are 100-200 theatres worldwide that are equipped with full on Digital Cinema. This isn't video, it's more like a computer server and display and most of these installations can't jack in other video sources. Most of these installations are in big urban markets in big plexes. The good news is that most of these theatres have the advertising projectors in most of there auditoriums as well.
So for somebody to do a small scale DVD release, only those few art theatres might be equipped to show them. But there are a lot of big plexes now that could show it badly, but those big companies will not be smooth to work with.