What exactly is macrovision and how does it work? Also I had seen some posts about getting a bad picture on HDTV with a standard composite video out on a satellite receiver, but I can't remember what the cure was. Does anyone know?

I'm not sure how macrovision works but it is a copywtite protection on DVD and VHS. In answer to you second question HDTV should look like nothing on composite video because as far as I know HDTV can't be transmited via composite.

What I meant was a standard satellite signal feeding a compsite input on a Mits HDTV. The picture looks like it is out of focus. I thought I read here that other people have experienced the same thing. The satellite picture actually looks much better on a cheap 20" TV.

If you look at an NTSC video signal on a scope, the video portion of the signal uses the top 75% amplitude of the signal and the sync portion takes up the bottom 25%. Within the 75% video portion of the signal, the higher the amplitude the brighter that part of the picture will be. In your TV the sync separator removes the sync portion of the signal from the video portion and sends it to the vertical and horizontal circuits to synchronize the video part of the signal to the scanning of the electron gun in the picture tube. Most VCR's use this 75%/25% ratio to set brightness level, they will automatically set the video part of the signal to be 75% of the entire signal.
Macrovision varies the amplitude of the sync part of the signal from about 15% to 80%. The VCR sets the video part of the signal to be 3 times the sync amplitude in order to preserve the 25%/75% ratio. When the amplitude of the video part of the signal is less than 75% the picture is too dark, if it is over 75% the picture is too bright. TVs are not affected.

Thon,
remember that an image on a 20" TV will be much smaller, so detail flaws will be much smaller as well. The image is also a lot brighter, pixel per pixel. These differences make it VERY hard to compare the image quality of small sets such as this with bigscreens.

Odd fact: at least one model of cheapo Mintek DVD players can be used with VCRs, and the Macrovision does not affect the signal.

So, basically, they're just messing with the sync pulse? Is this just on the output of the DVD or does the VCR have something to do with it? Also, has anyone experienced problems playing 480I composite video on an HDTV?

It is on the DVD's video output, composit, S, and component. Keep in mind it only affects VCR's, not TV's. If you are modulating the DVD output to an antenna system you will have problems with most TV/VCR combos or regular televisions when the customer uses the VCR tuner for channel selection. Some APEX DVD players can be modified for no macrovision, or use a copygard stabilizer to remove it before modulating.

Very odd fact: Beta VCRs never were affected by Macrovision, they process the video diferently than VHS does. If you run the video signal through an old Sony Betamax VCR it will remove the macrovision.