As a video software engineer, I know your pain from a slightly different angle.
Your "waterfall effect" is over quantization of DCT blocks (in rare cases it could also be misuse of the deblocking filters). It's pretty easy to avoid and most encoders can actually give feedback about quantization rates and whether artifacting will be visible in output frames.
The problem is that people don't know how to use their encoders correctly, use them with completely the wrong settings and then don't inspect the output to see the result.
The MPEG4 High Profile 4.1 used in BluRay discs is capable of practically flawless encoding at any motion rate if operated with a little care. MPEG4 allows custom and dynamic quantization and a two pass encoder can use the second pass to fix any mistakes by adapting the local bitrate and quantization method.
I actually suspect though that you're seeing MPEG2 video getting pumped at an MPEG4 bitrate which is causing massive over quantization. This generally happens when studios have MPEG2 encoding hardware but no MPEG4 encoding hardware but they are told "keep your video at X bitrate" – even though this leaves half the disc empty and the video looking like a stream of 8x8 shiny cubes.
Of course, some decoders don't implement deblocking algorithms correctly and actually *increase* blockiness in some cases. This would be the fault of your BluRay player – you'd need to play on a good software player and compare.
And don't get me started on interlacing in digital video. It's a "feature" that has only ever made digital video worse and is somehow part of most broadcast standards. Aaarrgh!