Well, my experience was exactly that. The LCDs looked good (great, in some cases) with Blu-Ray content, but not so good with standard def. And Full HD LCDs were even worse. And we looked at a lot of LCDs from various brands (including, it has to be said, B&O sets at £6,000).
Somehow, plasmas seemed to make a much better job of 'smoothing over' (without looking blurry or soft focus) and giving a much more natural-looking picture with standard def. content, not unlike a good CRT in fact. The colours seemed more natural too. We looked at a few, from Panasonic, Fujitsu and Pioneer, before eventually plumping for the Pioneer (428) which is great with both SD and upscaled DVDs.
As we watch 80% non-HD Sky and 20% DVDs, it was by far the best for the job. If we watched mostly HD then I might have been tempted by an LCD, particularly Sony's W3000. Right now, we watch all SD so plasma was best. Happily, I'm told that the Pioneer is also good with HD stuff, too, but I haven't tried it yet.
So, in short, yes, you're right!