No, you don't need digital cable but just be aware that a big screen tv will make a lousy picture look worse than it does on a smaller tv. If your cable TV looks like crap, it'll look worse on a big screen tv. DVDs will look great. If you have an older DVD player (non progressive scan), you might want to consider upgrading to one that is progressive scan. It's a better picture because you can use better cabling to connect it to the TV.
Having said that, I would (if you can afford it and have room) recommend get ting 50" or bigger. When I get one, it'll be a minimum of 50 possibly 60.
DLP is just the method of producing the image on the screen. It's still a projection type tv (not completely flat like plasma or LCD (LCD comes in both projection like DLP or flat screen like plasma)).
You may want to check out
www.fatwallet.com/c/18/ (use the search feature) for deals on DLP big screens. There's always something going on if you're not in a big hurry.
If you check out
www.circuitcity.com user reviews, you can get a good idea how the different models rate by reading real people reviews.
If you have membership (or a friend) at Costco, Sam's you can get pretty good deals there. Their selection is limited but if by chance they have a model you're interested in, the prices can't usually be beat by places like CC or BestBuy.