720 x 482 is the highest resolution of standard NTSC DVDs that are visible, regardless if it's played on a progressive or non-progressive scan DVD player.
If you size your full screen images to something along those dimensions, you'll get rid of that blocky look that your slideshow/dvd-burning software is compressing (or stretching them) to.
The resolution, is set at the time you burn the DVD, you can burn disks with lower resolution, I guess if space were a huge commodity, but I can't imagine wanting to do that.
I haven't seen any difference between using a JPEG or a TIFF for my slideshows, they all end up in the DVD VOB format, so they are converted. A good piece of software (Photodex for example off the top of my head) will also apply some anti-flicker filtration when creating the final product, to keep photos from looking funny when displayed via television.
Also, when outputting, you'll want to use a color profile that is correct for the display hardware that you'll be displaying on. I haven't seen a TV yet that had a AdobeRGB color profile, so I use SMPTE-C which is supposidly the current color standard for North America, but it's very very similar to NTSC's color profile, so either is good in the US, where my slideshows are seen. PAL for Europe and everwhere else, etc. etc.
Hope this helps,
Joel