For rentals , streaming, etc If you want total package lovefilms is better option but if you after streaming only Netflix wins hands down.
Looks like Lovefilm maybe the way to go, but the your latter point concerns me a bit, is the quality not up to much? Anyhoo, enough has been said so that I think it's worth down loading it and giving it a go.... ;)
Lots of people have complained about it, but honestly I've never really had issues.
Apparently quality varies quite a lot from title to title (or it could just be a bandwidth thing with more people using Lovefilm at the moment), but everything I've ever watched has been fine.
The (free) streaming content on Lovefilm is more limited than Netflix, but a lot of the films on Netflix are terrible movies, for films I'd probably say Lovefilm has a better selection of high profile movies at the moment (this changes obviously). For TV US Netflix is amazing.
Then of course theres the disc rental thing, the vast majority of new movies don't turn up on streaming services for a good few years and even the early ones are coming months after their disc release.
Maybe go with both.