It depends on which model D-Snap you have (there are several). I was looking at them myself to carry around in my pocket for all those “I wish I had my camcorder with me” moments. ;-) The SV-100 has MPEG2 resolutions of 704x480 (fine) and 352x480 (normal). You’ll notice that DV is 720x480 and so the 704 horizontal resolution is less on the D-Snap. I assume the picture would be stretched on playback which would make it everyone look fatter. Perhaps the built in screen compensates for this which is why you see a difference?
From what I’ve read about that mode, it compresses the MPEG2 more than your typical DVD so you should not expect this compressed video to look as good as DV, or even DV converted to MPEG. I don’t know what you’re seeing so I can’t tell what might be strange about it. I would not expect too much from this camera.