Size isn't an issue by itself- it's viewing distance + size. The further you sit from your display, the bigger the display must be to properly get a benefit from 720/1080p material. There is no reason that you would not gain in going to blu-ray from that TV, unless you sit quite far away.
How far do you sit?
Also, regarding sound quality- that's a bit of a different kettle of fish. You will gain some fidelity vs. DVD's but the difference may be negligible on TV speakers. In order to truly enjoy the benefits of blu-ray, honestly you really need SOME kind of home theater setup in my opinion. Audio is one of the biggest improvements vs. DVD.
Finally, do you have any HD channels now via cable/satellite? How do they look? BD is going to look at least as good if not sharply better.
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