Hi Dorian, welcome to the site.
If you want to sell downloads, then it's really hard to beat the quality from the original DVD, which can be ripped as an ISO file, and stored online. People can then download that ISO file. Your only concern here is having a good host, with adequate storage and bandwidth to meet your traffic needs. That's actually true of any website, and any sort of video content (streamed or downloaded). And then you have to be very careful that you don't break the "terms of service" of the host, meaning they don't allow "downloadable" content (i.e., file storage). The big stupid unlimited hosts like Godaddy, 1&1, and anything owned by EIG are infamous for that.
I would provide an ISO, if it's truly "for sale".
For example, thanks to the donation of one of our forum members, this very minute I'm actually uploading a 2GB DVD ISO to the server. It's the demo disc for the Elite Video BVP-4, and this site wishes to share it with any who want it (seeing how it's rare, as an include with a long-ago discontinued product). This site is on a dedicated server, so space/bandwidth isn't a large concern.
See this for a list of good hosts: http://www.digitalfaq.com/forum/web-...-best-web.html
Now, if you wanted to provide a video somebody could watch in their web browser, like you do a Youtube, then you'll be forced to convert it to a streaming format. At the current time, H.264 is most suggested. But there's a catch. It's easy to make bad quality video (as evidenced by Youtube), and difficult to create high quality videos. You'll need to worry about proper 1:1 aspects, pre-filtering, and using high quality H.264 encoders (all of which are payware; the freeware is rather blah in quality). If you'll be selling these, then it's in your best interest to get it professionally converted for viewing. Not to spam my own post, but note that H.264/streaming conversion is a service offered by The Digital FAQ, and done professionally for several studios -- Contact Us
if you'd like to know more.
Of course, you could also use the crappy quality "free web versions" as incentive to buy the high quality DVDs. Assuming you think it's just that good, and that others would want to buy the disc to see it again.
Yet another option is a subscription service -- pay one price to view and download videos. Watch in browser at a "standard" quality, and then download a high quality "computer version" or even the original DVD ISO file. Of course, that will require a subscription-based website setup.
This is more of a website planning topic, so I've moved it out of the video forums.
If you have any more questions, feel free to ask.