The video quality of a VCD is much lower than a DVD. That's because a CD-ROM can only hold 650 Megs of data, compared to DVD's 8 gigs (for a dual-layer DVD). To fit video onto a VCD, the video is highly compressed and runs at 352x240 resolution (compared to DVD's resolution of 1920x1080).
VCDs were also designed to run on old CRT TVs or old VGA monitors with low resolution. Playing them full screen on a modern TV or monitor, they will look bad due to scaling the video up to the higher resolution. This causes blockiness, pixelation, loss of clarity, etc...
Unfortunately, there isnt much you can do, other than run the video at its native resolution, or maybe scaled up slightly.