I was surprised by this, but then went to read SeÃ¡n's review of the 1105HC which indeed shows that particular LiteOn recorder to have a definite poorer quality at HQ recording than other units.
I know your question was about MPEG4 encoding, but unless you're going to get a whole new system to encode to high resolution MPEG4, then it likely that any results are always going to be worse than expected. My advice would be that you should pursue the DV -> MPEG2 route using a standalone DVD recorder of good quality, because this is simply the best and most covenient way to transfer this type of footage.
One thing you could do, if you are not satisfied with the HQ quality of the LiteOn, is to return it and exchange it for another recorder that has better video recording quality. Some of the Sony recorders (and Pioneer, I think) have a special high quality recording mode which is supposed to give spectacular results with DV material.