since the only type of displays that can show things interlaced is the CRT and LCDs can't properly show video interlaced, is it normal for videos to show up on a LCD a bit blurred at the full size of 720 by 480 when deinterlaced?
Depends what deinterlacer algorithm you use. If simple "blending fields" then you'll lose up to 50% of your vertical resolution and frames with motion are blurred. Using smart deinterlacer (or adaptive) makes things far better.
Good source to learn all about deinterlacing: http://www.100fps.com/
