The 35mm copy skips and would take a lot of work to fix so they'll try the 16mm copy... In terms of quality, what does this really mean??
If the 16mm print was properly copied (i.e., good lab work in the original reduction and printing), a DVD or VHS copy from it should look essentially identical to a DVD or VHS copy made from a 35mm preservation print (which would also have been made from a dupe negative copied off a nitrate), but perhaps not as good as one made directly from a 35mm nitrate.
No standard definition video copy has even a quarter the resolution of a good 16mm film print, although a good DVD may resemble a decent 16mm dupe and can equal a very good 8mm film print. Likewise, a "high-definition" video copy can equal a very good 16mm film print and look like a decent 35mm dupe or release print. Besides the source print quality, a major factor will also be the quality of the transferring equipment, whether film chain or scanner, and the people operating it.
--Christopher Jacobs
http://hpr1.com/film
http://www.und.edu/instruct/cjacobs