D2H has good picture and audio quality atleast not less than Airtel. I got it connected to my 42'' LED TV and dint observe picture blurring even on SD channels. The HD channels are really good with most of them having a 5.1 Dolby Digital Output. The HD Zapper box has a Digital Coaxial SPDIF out to connect to 5.1 home theater. No analog audio out.
The highest package would cost you around Rs. 470 (+Rs 30 if you want USB recording) where you'll get almost all channels except for a few channels like Zee Khana Khazana, Zee Q, Ten Cricket.
D2H has promotional offers where you can get the Set Top Box free of cost if you opt for 1 year recharge. Well, technically the set top box will still be a property of d2h. But you can use it as long as you are using d2h services. For more offers see this page
D2H Satellite - DTH Connection - Digital Dish TV Offers - DTH Satellite Box - Videocon d2h
If you would like to purchase the STB, you can purchase it and opt for the Long term recharge option to get extra benefits like 40 days free on 1year recharge. Also you get free subscription of d2h cinema (screens latest bollywood movies) and two d2h movie channels.
Videocon has recently introduced new HD Set top box Model 2222 which has inbuilt USB recording capability. The last software update for the old hd box was kind of buggy and an update is long awaited. There are some reported issues (not confirmed) with new stb like picture resolution fixed at 1080i@50hz but hoping they will be fixed soon with a software update. Overall its better to get the new model than old one.
I've been with d2h for 10 months and so far no issues with stb or dish except for minor s/w glitches in stb after last update. Slight drop in signal during heavy rain and pixelation for a few secs in channels. But most of the time the signal and quality levels for me in Hyd are > 90%
All the best!