Yes, getting a DSUB15 to Component converter (like the Audio Authority 09A60 for $110 shipped) will definitely increase your picture quality because your computer is a much better scaler than your HDTV's built in scaler. This is definitely the way to go if you're going to drive your HDTV with your computer.
Also, no, do not go with a Radeon and component dongle. ATI in their infinite wisdom, decided to limit the output to 480 when using the dongle, thereby discarding the biggest reason to actually use a computer to drive your TV.